4-hour timeframe
Technical data:
The upper channel of linear regression: direction – up.
The lower channel of linear regression: direction – up.
The moving average (20; smoothed) – up.
CCI: 197.9254
The British currency paired with the US dollar managed to rise in price last night by only 50 points, no more. That is less than the euro added. But the reasons for the continued fall of the US currency were very strong. The Fed lowered the rate for the third time in a row, did not hint that it would take a break in the cycle of easing monetary policy, and also continued to buy back $60 billion of Treasury securities monthly. At the same time, Brexit is paused, the British Parliament is preparing for re-election on December 12, and today is the day when Brexit was supposed to be held according to the previous plan. Together, this suggests that the pound had a reason for stronger growth last night.
However, in practice, growth turned out to be much more modest, and now you should understand what it is connected with. The British currency, after rising by 800 points, continues to remain in place, as if reflecting on the correctness and expediency of such a rise. Traders do not receive new data that could support the pound. For a week and a half, no macroeconomic data have been received from the UK at all. Although we remember that recent publications have indicated that the UK economy continues to experience problems (as, for example, the EU economy). Thus, potentially new economic data from Foggy Albion could cause sales of the British currency.
On the topic of Brexit, now we can say only one thing – you need to wait. Wait for the election results in December, and only then think how everything will change. Michel Barnier, the EU chief negotiator for Brexit, believes that a "hard" Brexit is still possible. According to Barnier, if the UK Parliament does not ratify the agreement reached by Boris Johnson by January 31, and the EU refuses to once again extend the term of the "divorce", then a "hard" Brexit option will take place. It could also happen during or at the end of the "transition period" if London and Brussels do not agree on a new trade agreement. Meanwhile, experts have calculated how much it will cost the UK to leave the EU under Boris Johnson's "deal." At 70 billion pounds. According to studies, after 10 years, the country's GDP will not receive about 3.5%, compared with the value if the country remained in the European Union. Before the upcoming parliamentary elections, very interesting information makes us wonder once again: do the British need to leave the European Union? The NIESR Institute believes that the Boris Johnson agreement reduces the risk of a disorderly exit of the country, but also excludes the close economic and trade ties between the EU and Britain in the future. However, we should also not forget that Brexit itself, "for" which the inhabitants of the UK voted in 2016, just meant an exit from the jurisdiction of Brussels. That is, after the implementation of Brexit, Britain will be able to negotiate its foreign trade policy with other countries, trade with whom it wants and according to its own rules (unless, of course, we are talking about a "deal" with Donald Trump). That is, initially, Brexit was conceived and intended to improve the life of the country and its inhabitants, independently deciding their fate.
From a technical point of view, the upward trend of the pound/dollar pair remains. Thus, the British currency can continue its upward movement, but we are still confused by the strong growth of the currency a week ago, after which there was not even a more or less tangible correction. Factors for further growth of the pound are now clearly in the United States, but the situation in the UK itself does not strongly support the further strengthening of the British currency.
Nearest support levels:
S1 – 1.2878
S2 – 1.2817
S3 – 1.2756
Nearest resistance levels:
R1 – 1.2939
R2 – 1.3000
R3 – 1.3062
Trading recommendations:
The GBP/USD pair resumed its upward movement on the background of yesterday's "dovish" decisions of the Fed. Thus, traders are advised to re-consider buying the British currency with the targets of 1.2939 and 1.3000, as technical indicators currently support this scenario. The calendar of macroeconomic events in the UK is empty again today, and it is recommended to move to buy the US currency no earlier than the bear moving across the moving average line.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustrations:
The upper channel of linear regression – the blue line of the unidirectional movement.
The lower channel of linear regression – the purple line of the unidirectional movement.
CCI – the blue line in the regression window of the indicator.
The moving average (20; smoothed) – the blue line on the price chart.
Support and resistance – red horizontal lines.
Heiken Ashi – an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
