FX.co ★ Analysis and forecast for GBP/USD on October 19, 2020

Last week's trading ended for the British pound with a decline of 0.89%. This is not surprising, since the US currency at the auction on October 12-16 strengthened against all major competitors, except the Japanese yen.

The EU summit, whose main goal was to agree on further relations between the EU and the UK, did not bring any concrete results. I believe that this result was not unexpected for the majority of market participants. Both sides of the divorce process are too ambitious and uncompromising. EU leaders, in particular French President Macron, believe that the UK must do more to reach a deal, and London constantly insists that it is ready to agree, but only if the EU respects the sovereignty of the UK. Rather vague wording. Isn't it? In general, the case is dark. There is still time until the end of this year when the issue of Brexit should be finally closed. I think that the deal can be concluded at the very last moment when there will be nowhere to delay and transfer further.

As for the epidemiological situation in the UK, it has worsened, especially in London and in the Northern part of England. In this regard, the authorities have introduced several restrictive measures. For example, people from different families are not allowed to hold meetings in closed rooms. Manchester authorities have received a notification from Prime Minister Boris Johnson about the possible introduction of tougher quarantine measures. The population of those areas where new restrictions have already been introduced or are about to be introduced, to put it mildly, is not happy. But nothing can be done, this is the real need.

Weekly

Despite the final weekly decline in the GBP/USD currency pair, not everything was so clear. As you can see, the first attempts were made to continue the upward trend, but a strong technical level of 1.3080 limited the rise and turned the quote down. I believe that the red line of the Tenkan Ichimoku indicator also played a significant role in this, which provided strong resistance.

Now about the prospects of the pound/dollar pair. The upward scenario will be resumed not only after the breakdown of the Tenkan and the level of 1.3081. However, to demonstrate the seriousness of their intentions, the pound bulls need to pass the 200 exponential moving average, which is at 1.3132, and close the current weekly trading above this mark. Thus, we will consider 1.3075-1.3132 as a strong and defining resistance area. To continue the bearish direction of the instrument, you need to update the previous lows at 1.2861, then check the strength of the strong technical zone of 1.2811-1.2762, where the broken resistance, 89 EMA, Kijun line, and 50 simple moving average. If the downside players manage to cope with this difficult task, their next target will be the support level of 1.2673.

Daily

In this timeframe, we see that the pair was caught between the Tenkan line, which provides resistance, and the 89 EMA with Kijun, which provides support to the price. It is also worth noting that the pair is located near the lower border of the daily Ichimoku cloud, the exit from which, in my opinion, is still too early to be considered successful. The breakdown of the Kijun and the black 89 exponentials will once again test the strength of the support level of 1.2845, if it does not stand, we are waiting for the subsequent decline to the 200 EMA, which passes at 1.2777.

Given the ambiguous picture on the considered charts, especially on the daily chart, we can assume positioning in both directions. We open the nearest sales if bearish candle patterns appear in the area of 1.2940-1.2960. We are preparing to buy if the daily, 4-hour, or hourly charts show bullish reversal patterns of candle analysis in the support zone of 1.2880-1.2845. That's all for now. Tomorrow, if the technical picture changes, we will adjust the options for positioning in GBP/USD.