GBP / USD. Good news from Junker and no bad news from the Bank of England

The pound-dollar pair reached the middle of the 25th figure - the last time the price was at this level a few months ago, namely in July, in the wake of yet another optimism regarding Brexit's prospects. Today's pair growth is also associated with the "divorce process". Despite the continuing uncertainty, encouraging signals are coming to the market that reduce the risk of a "tough" scenario.

It is necessary to immediately warn that the parties have not yet reached a clear breakthrough in the negotiations: the growth of the British currency is based only on the comments of top officials and politicians. Over the past three years, traders of GBP/USD have repeatedly passed through these stages of the negotiation process. This cycle is well known to investors - at first, London and Brussels declare mutual intransigence, followed by a period of "thaw" when the parties hint at a compromise. But in the end, the situation comes to a standstill once again, and market participants are forced again to observe this vicious circle, trading in conditions of increased uncertainty.

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Given the background to this issue, one should not be surprised at the temporary optimism of traders. The parties are talking about compromising again, and this fact pushes the pair up to local maximums. The immediate reason for optimism was the comments of the head of the European Commission, Jean-Claude Juncker. Without going into details, he said that a long-suffering deal could still be concluded before the "X-hour," that is, until October 31. Moreover, on Wednesday, Junker took a diametrically opposite position - he spoke with the same confidence that the risk of "hard" Brexit is increasing every day, since Britain does not provide Brussels with alternative options for the back-stop mechanism.

However, there are indeed certain shifts in the negotiation process. Just yesterday, the British Commission finally received written proposals from the British side on the Brexit issue. As the EC spokeswoman clarified, on the basis of these documents, the negotiations will resume again in the coming days, and whether Juncker's optimism is connected with this fact or not is unknown. Nevertheless, the presence of some progress on this issue provides strong enough support for the GBP/USD pair. The pound is very sensitive to the Brexit topic, and any more or less reliable news regarding its prospects provokes significant volatility. You can imagine the price fluctuations of the pair at the conclusion of the transaction, if only cautious assumptions of the European politician allowed the pound to grow by more than 100 points.

Generally, the GBP/USD pair has been showing an upward movement (albeit with deep downward pullbacks) since the beginning of September - that is, from the moment that the deputies of the House of Commons obliged the prime minister to agree on the next Brexit postponement, if the government fails to conclude a deal that the parliamentarians approve. And although experts are still discussing Johnson's possible maneuvers (appeal in court, direct disobedience to the law, interpretation in their favor, etc.), these scenarios still seem unlikely, even though they cannot be completely excluded, given the odiousness of the current head of the cabinet.

The pound received some support yesterday following the meeting of the Bank of England. In this case, traders were guided by the thesis: "absence of bad news = good news". Despite the general suspicion of the regulator, the Bank of England voiced a rather restrained position - the market clearly expected a more "dovish" mood, especially after crushing data on inflation growth in August. In addition, market participants drew attention to the distribution of votes for maintaining the rate - "9-0-0". This suggests that all members of the Committee were in favor of maintaining the rate, and none of them voted for its reduction. This fact, which under normal conditions would have been simply ignored by traders, supported the British currency.

In general, the September meeting of the Bank of England turned out to be quite faceless, although the regulator's members focused on the risks associated with a slowdown in inflation this time. According to published forecasts of the Central Bank, inflation will remain below the target two percent level at least until the end of this year. At the same time, the Central Bank emphasized that if the uncertainty in the Brexit issue continues, inflation will slow down significantly. The regulator also slightly reduced its forecast for GDP growth in the third quarter to 0.2% (from the previous value of 0.3%). But overall, according to the Bank of England, the British economy is still growing, despite the slowdown.

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Summarizing the previous meeting of the English regulator, two more points should be highlighted. First, the Bank of England emphasized that the reaction to the "hard" Brexit will not be automatic - relatively speaking, when the country leaves the transaction on October 31, at the November meeting, the regulator will not headlong to lower the rate. At the moment, all forecasts of the Central Bank are based on the assumption that Brexit will take place according to the "soft" scenario. In this case, according to the Central Bank, the regulator will be able to "gradually increase the interest rate."

In other words, it all comes down to Brexit - both the prospects for the pound and the prospects for monetary policy. In the meantime, the resistance level for the GBP/USD pair is around 1.2600 (the upper line of the BB indicator on the daily chart). The next (strongest) level is much higher - at around 1.3000 (the lower border of the Kumo cloud, which coincides with the upper line of the BB indicator on the weekly chart). At the moment, this target seems unattainable, but if London and Brussels continue to demonstrate their willingness to conclude a deal, the pound will quickly rise to the indicated levels. Otherwise, the pair will return to the framework of the 23rd figure.

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EUR/USD: plan for the European session on September 20. The Federal Reserve Bank of New York continues to buy billions of

To open long positions on EURUSD you need:

Yesterday it became known that the Federal Reserve Bank of New York conducted another buyback of debts in the amount of $ 75 billion, thereby providing banks with liquidity support. This time, sellers of the US dollar left this fact unattended, while on Tuesday this news led to a fall in the US dollar. Nothing has changed at all from a technical point of view. Buyers still need to break above the resistance of 1.1074, which will lead to the euro's continued growth to the area of a high of 1.1110, as well as to update a larger resistance level at 1.1151, where I recommend taking profits. If the pressure on the euro returns in the morning, then it is best to consider new purchases after updating support at 1.1031, with the condition of the next formation of a false breakdown there, or a rebound from a larger low in the region of 1.0992.

To open short positions on EURUSD you need:

Traders ignored the data on the state of the US economy yesterday in the afternoon, as well as a report on the negative growth of the current account balance of the US balance of payments, which maintained equilibrium in the market. Sellers will continue to wait for a breakout of support at 1.1031, which will increase the pressure on the pair and will lead to a further decrease to the area of a larger low 1.0992 and 1.0955, where I recommend taking profits. In case the pair grows in the first half of the day to the resistance area of 1.1074, one can look at short positions only on a false breakdown. You can sell EUR/USD immediately for a rebound from last week's high in the region of 1.1110. Given that important fundamental statistics are not expected today, volatility may remain quite low.

Signals of indicators:

Moving averages

Trade is conducted in the region of 30 and 50 moving averages, which indicates market uncertainty.

Bollinger bands

A break of the lower boundary of the indicator at 1.1040 will increase pressure on the euro, while the upper boundary at 1.1074 will limit the upward potential in the morning.

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Description of indicators

  • MA (moving average) 50 days - yellow
  • MA (moving average) 30 days - green
  • MACD: Fast EMA 12, Slow EMA 26, SMA 9
  • Bollinger Bands 20
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Overview of GBP/USD on September 20th. Forecast according to the "Regression Channels". The British pound "tears and thrashes"

4-hour timeframe

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Technical data:

The upper channel of linear regression: direction – down.

The lower channel of linear regression: direction – up.

The moving average (20; smoothed) – up.

CCI: 188.1252

In recent days and weeks, it seems that there are no problems in the European Union except the British Brexit. And Boris Johnson's duties include only the daily distribution of interviews regarding Brexit standing on a "dead center". Yesterday, European Commission President Jean-Claude Juncker said that the parties can still agree on Brexit. Otherwise, "disaster awaits us," Juncker said. He once again warned London that it is waiting for devastating consequences in the case of a "hard" scenario Brexit, also saying that the European Union is ready for such an option. And now, dear traders, just think, how many times have you heard such statements in recent months? What is the point in them if the Brexit process cannot be completed for three years? If he openly stands still last year? If the UK is mired in a political crisis, and Boris Johnson cannot even establish relations with deputies and get the support of Parliament? Moreover, he continues to openly fight with parliamentarians, not realizing that 450 people are still stronger than one Prime Minister. Five defeats in key issues the 2-month parliamentary vote eloquently indicate who can win in the long run.

Most surprisingly, the pound continues to strengthen against the US currency. It continues to grow despite the failed reports on inflation and retail sales for August. Although the Bank of England has not changed monetary policy. Although the optimistic news on Brexit in recent days, in fact, no. If at first, the pound began to grow on the increase in the probability of transferring Brexit to 2020, now there are few new growth factors for the British currency. However, after each "black" band comes "white". The pound has been declining against the US currency for a very long time, often purely by inertia, so the pound/dollar currency pair has accumulated a strong oversold. It can be worked out now both by private traders, and major players.

There are no macroeconomic reports scheduled for the last trading day of the week in the UK. However, unlike the EUR/USD pair, this does not mean that today will be boring and uninteresting. As you can see, in the Asian trading session and at the beginning of the European, the pound shows strong growth, which can continue throughout Friday, September 20. The technical picture indicates an upward trend and no correction. The lower channel of the linear regression is pushed up, as is the moving average line. A reversal upward of the senior channel will mean a change in the direction of the global trend.

Nearest support levels:

S1 – 1.2512

S2 – 1.2451

S3 – 1.2390

Nearest resistance levels:

R1 – 1.2573

R2 – 1.2634

R3 – 1.2695

Trading recommendations:

The GBP/USD pair continues to move upwards. Thus, traders are now encouraged to continue buying sterling with targets of 1.2573 and 1.2634, the first of which has already been worked out. It is recommended to sell the pound not before fixing the pair below the moving average.

In addition to the technical picture, fundamental data and the time of their release should also be taken into account.

Explanation of illustrations:

The upper linear regression channel – the blue line of the unidirectional movement.

The lower linear regression channel – the purple line of the unidirectional movement.

CCI – the blue line in the indicator regression window.

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.

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Overview of EUR/USD on September 20th. Forecast according to the "Regression Channels". The ECB and fed meetings are over.

4-hour timeframe

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Technical data:

The upper channel of linear regression: direction – down.

The lower channel of linear regression: direction – down.

The moving average (20; smoothed) – sideways.

CCI: 20.7650

Here comes the last trading day of the week, which was supposed to be fantastic for the EUR/USD pair, and instead we observe either high volatility or a low volatility flat. The trading week ended with a fall in traders' activity to almost zero. On Friday, September 20, not a single important macroeconomic publication is planned, so there will be no fundamental background for the euro/dollar pair today. Thus, we do not expect strong movements from the currency pair today, we do not expect that a trend movement will suddenly begin. Most likely, the week will end as calmly as it passed.

Today, we can once again ask ourselves, what awaits the pair in the coming weeks? Still, at the moment, the meetings of both central banks are over and it is possible to draw certain conclusions on their monetary policy, as well as on the attitude of traders to the adopted changes. In short, the ECB eased the already "ultra-soft" monetary policy, because there was simply no other way, and the Fed lowered its key rate when it was not particularly necessary, from macroeconomic statistics. What does that say? The fact that the US dollar in confrontation with the euro remains "on horseback" in the medium term. The European Central Bank will also launch a quantitative easing program in November for 30 billion euros per month. Thus, despite the "double bottom" pattern, which we have already discussed several times, despite the seemingly favorable time for the strengthening of the euro, the prospects for this currency, from our point of view, remain very vague. If a trade war begins, as many experts expect, in October-November, then a single European one will not be envied at all, since it is already clear who will benefit from the trade conflict. More precisely: who will suffer less damage from the trade conflict.

What about the reaction of traders to two meetings of regulators? At the meeting, the ECB reacted first with the stormy purchases of the dollar, then with the same stormy euros, after which everything calmed down. At the Fed meeting – restrained purchases of the dollar, which the next day was completely leveled. As a result, the pair continues to remain near its two-year lows, with the "double bottom" pattern, which is not implemented, since the euro/dollar pair is not growing, but it is not canceled since bears are not able to update the lows once again. And in our experience, we can say that such a state can last for several days, and maybe even weeks.

From a technical point of view, we have a formally upward trend, since the price is above the moving average, but in fact, we have a flat at our disposal. Over the past few days, the pair changed direction and overcame the moving average 6 times.

Nearest support levels:

S1 – 1.1047

S2 – 1.1017

S3 – 1.0986

Nearest resistance levels:

R1 – 1.1078

R2 – 1.1108

R3 – 1.1139

Trading recommendations:

The euro/dollar pair has fixed back above the moving average line, however, we now recommend waiting for the completion of the flat and only then resume trading.

In addition to the technical picture, fundamental data and the time of their release should also be taken into account.

Explanation of illustrations:

The upper linear regression channel – the blue line of the unidirectional movement.

The lower linear regression channel – the purple line of the unidirectional movement.

CCI – the blue line in the indicator window.

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.

The material has been provided by InstaForex Company - www.instaforex.com

Elliott wave analysis of GBP/JPY for September 20 - 2019

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GBP/JPY saw a low at 134.38 well above 133.86 which is the key-levels indicating a more substantial correction in red wave c of red wave ii finally is developing towards 130.78.

As long as short-term key-support at 133.86 is able to protect the downside, we must allow for a re-test of the peak at 135.66. However, we think the upside should be limited from here.

A break below 133.86 will call for a decline to at least 132.00 and ideally closer to 130.78 to complete red wave ii.

R3: 136.09

R2: 135.83

R1: 135.66

Pivot: 135.13

S1: 134.70

S2: 134.38

S3: 133.86

Trading recommendation:

We are looking for a GBP-buying opportunity near 131.15

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