The GBP / USD pair declined by more than 200 pips yesterday, dropping from 1.3435 to 1.3225. It took the pound bears only a few hours to do this, while the pound bulls, on the other hand, took less than an hour to regain almost all of the lost positions.
In general, the movement yesterday was indicative. Perhaps, this is because the pound holds the record for the highest number of false price movements, especially when the issue on Brexit comes to the fore. The market is very sensitive to all kinds of rumors that are published in the British and European press. In most cases, journalists relay negative scenarios, thereby stirring up interest in the topic of "divorce proceedings." Traders, in turn, do not wait for official confirmations or denials, making trading decisions very quickly, which are most of the time not in favor of the pound. Then, after some time, the real picture of the state of affairs emerges.
Such a scenario also happened yesterday, when in the morning, news emerged that UK Prime Minister, Boris Johnson, has made a decision to withdraw from the negotiations. Prior to that, similar information has circulated in the market, but it involved French President Emmanuel Macron, who allegedly expressed a desire to leave the negotiating table in preparation for Britain's exit from the EU without a trade deal. Because of these rumors, the pound plunged down the market, reaching multi-week price lows.
But in the end, these rumors were proven to be false. Boris Johnson is not leaving the negotiating table, and on the contrary, has announced that he will go to Brussels this week to meet with Ursula von der leyen, President of the European Commission. As for Emmanuel Macron, he also remains in the negotiation process, although he continues to take the toughest position regarding the terms of the discussed trade deal.
Going back to Johnson, he will travel to Brussels this week for face-to-face and personal talks with EU leaders (according to other sources, informal meetings with the leaders of Germany and France will also be held). This event, hypothetically, can move the situation from the dead point. In the past, it was the personal meetings of the head of the British parliament that decided the fate of Brexit (the general agreement).
To add to that, Johnson has expressed his categorical disagreement with the prolongation of the transition period. According to him, there will be no negotiations in 2021, so everything should be decided within the framework of this year. Therefore, the situation around Brexit will continue to escalate to its limit.
The negotiations in Brussels will also include talks about the implementation of the so-called "Australian scenario" (when a commodity exchange takes place under WTO rules, but separate trade agreements are concluded).
With regards to the GBP / USD pair, trading in such volatile conditions is proving to be quite difficult. For example, the pivot point cannot be identified yesterday, even when using any prior signals. If not for the news of Johnson's visit to Brussels, the pair would have continued its decline to the base of the 30th figure, and probably even lower. Therefore, short-term trading should not be considered in the pair.
Of course, Johnson's trip to Brussels does not guarantee the conclusion of a deal. It only increases the likelihood of such a scenario. Therefore, downward price pullbacks can still occur, so traders must take them into account when calculating transaction volumes. A more reliable option is to wait for the results of the negotiations between Johnson and von der Leyen, while a more risky idea (but at the same time more profitable as long as there is positive results on the negotiations) is to enter the market from the current positions, targeting strong upward movement to price levels 1.3435 (the high of the current week) and 1.3480 (the upper line of the Bollinger Bands in the daily chart). In the second option, it is necessary to take into account the possible drawdown, since on the eve of his visit,