4 hour timeframe
Amplitude of the last 5 days (high-low): 118p - 132p - 126p - 217p - 106p.
Average volatility over the past 5 days: 124p (high).
The pound will continue to trade very actively every day, if the European currency maintains a volatility close to the "low" value. Today is no exception. In addition, as in the case of the European currency, the downward movement resumed for the pound / dollar pair. But if in the case of the euro, the movement was likely to continue, then in the case of the pound, the pair first corrected, then resumed moving down, and now, it can begin a new round of upward correction. In case that the whole "minimum area" regularly plays a trick on the euro / dollar currency pair, then the bears do not want to continue selling around which. Meanwhile, in the case of the pound, it continues to keep down the level of 1.2978, from which the quotes rebounded seven times in the last four weeks. Thus, the resumption of the decline of the British pound is delayed.
In the UK, macroeconomic data today were indeed optimistic and simply strong unlike the European Union. The index of business activity in the service sector increased from 52.9 to 53.9, that is, added a whole point, which provoked the purchase of the pound this morning. However, after lunch, all the same macroeconomic statistics from across the world, which we already spoke about in the EUR / USD review, allowed the bears to return to the game and the pair began to decline again. And then on its way arose the level of 1.2978, which could not be overcome once again, led to a rebound. It turns out that the movement of the British pound today was influenced by both fundamental and technical factors. All of them led to versatile movements throughout the day.
What can be said as a result? The British pound is also prone to decline against the US dollar, as well as the euro. In the UK, things are even worse than in the European Union, and the potential economic slowdown can be much stronger than in the EU. Although, if Donald Trump still introduces duties on the products of the automotive sector of the European Union, then the European economy will not be too greeted. However, one way or another, it is the British and European economies that strive to decline into the bottom. Due to technical support lines, both European currencies still manage to stay above, but there is a strong impression that both currencies will collapse sooner or later.
Meanwhile, experts continue to discuss the prospects for Britain after 2020, when, most likely, the "transition period" will end. Great Britain will leave the EU completely and will trade with Europeans either according to WTO rules or under a trade agreement if it is reached during 2020. All experts were divided into two groups. The first one believes that the "era of opportunity" is opening up for Great Britain, while the second believes that the country will now become a "secondary player on the world stage." The first group notes that the growth rate of the Kingdom's economy has slowed down since joining the EU than it had been for decades and even the creation of a single European market in the 80s did not lead to accelerated economic growth. In fact, opponents of the European Union believe that the Alliance "slowed down" Britain, and now, the Kingdom will be able to be free. London remains one of the largest financial centers in the world, as well as a leader in the field of artificial intelligence. It is also noted that unemployment in the country remains at a 45-year low - only 3.8%. Naturally, the trade aspect is also noted. The fact is that London will now independently decide with whom to trade, in what volumes and set prices individually should favorably affect prices themselves, production volumes and an increase in the quality of goods. However, supporters of the opposite opinion are much more. Firstly, it is noted that companies whose activities are related to free movement within the European Union, as well as duty-free trade in goods will suffer after Brexit. And there are a lot of such companies over the past 47. Secondly, the UK economy has already lost 130 billion pounds, another 70 be will be lost during 2020, and no one knows what will happen next. Thirdly, the Bank of England lowered its forecasts for GDP growth for the coming years, that is, in fact, expects a further slowdown in the economy. Fourthly, the UK is leaving companies, manufacturing, banks, which are very dependent on the European Union.
At the moment, the British pound may go into correction again. We recommend waiting for the confidence to overcome the level of 1.2978, which will allow us to expect the resumption of the formation of a downtrend. Otherwise, the pound / dollar may be in a sideways movement. As for an upward trend, there are frankly not enough fundamental reasons and grounds now.
Trading recommendations:
GBP / USD is trying to continue a new downward trend. Thus, sales of the British pound are currently relevant with the target of the support level of 1.2894; however, we recommend waiting for the level of 1.2978 to be overcome, since the price has already rebounded from it 7 times. Moreover, the pair's purchases can be considered again if the price returns to the area above the Kijun-sen line with targets at 1.3152 and 1.3283. Thus, extra caution is recommended when opening any positions.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicators window.
Support / Resistance Classic Levels:
Red and gray dashed lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movements:
Red and green arrows.