4-hour timeframe
The amplitude of the last 5 days (high-low): 80p - 110p - 89p - 59p - 134p.
Average amplitude for the last 5 days: 94p (87p).
The British pound sterling on Wednesday, January 2, also fell against the US currency. Thus, the conclusion is that it is the increased demand for the US dollar that caused the euro and the pound to fall. It remains only to understand the reasons for this growth of the US currency on the first trading day of the new year. From our point of view, since no important macroeconomic reports have been published today and no important information has been received from the United States as a whole, such a strong strengthening of the dollar is due only to the fact that at the end of last year, traders closed "dollar" transactions in order to take profits, and with the onset of the new year they started to restore them. However, we also believe that the growth of the dollar will not be long-term this time, despite the absence of clearly expressed reasons for strengthening the pound sterling. In January, there will be a vote on Brexit in the UK Parliament, and it is unlikely that until this moment traders will take too much risk and zealously buy the US currency. After all, it is not clear to anyone how the voting on the Chequers draft will end. Thus, tomorrow we can witness a pullback to the top. The index of business activity in the UK manufacturing sector quite unexpectedly surpassed the forecast value (54.2 against 52.5), however, as we see, no special support was provided to the British currency.
Trading recommendations:
The GBP/USD currency pair began a strong downward movement, which can be completed fairly quickly, since there were no fundamental reasons for it. Thus, we recommend not to rush in selling the pair, although in the long term the downward bias persists. Purchase orders are not yet relevant.
In addition to the technical picture, fundamental data and the timing of their release should also be taken into account.
Explanation of illustration:
Ichimoku Indicator:
Tenkan-sen-red line.
Kijun-sen – blue line.
Senkou span a – light brown dotted line.
Senkou span B – light purple dotted line.
Chikou span – green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD:
Red line and histogram with white bars in the indicator window.
The material has been provided by InstaForex Company - www.instaforex.com