4-hour timeframe
Amplitude of the last 5 days (high-low): 179p-354p-101p-234p-75p.
Average volatility over the last 5 days: 189p (high).
The GBP / USD currency pair resumed its downward movement on Thursday after a minimal correction. In previous articles, we have already pointed out that today, the pound can only be expected to resume falling, as there were no chances that the macroeconomic statistics would suddenly begin to improve in the Foggy Albion. In the same way, there are chances that the Bank of England will suddenly begin to shift its rhetoric and mood in the direction of tightening. In practice, it turned out that the Bank of England has not changed its "dovish" attitude, which is still expressed in its willingness to lower the key rate right now, but members of the monetary Committee fear that they will deprive themselves of one of the most important and powerful tools for influencing monetary policy right before the "divorce" with the European Union, followed by long and difficult negotiations with Brussels on a trade agreement, which could end with Brexit without any agreements. This means that potentially, in the future, stimulation of the UK economy will not be needed more than once, allowing the British regulator to simply use a trump card in the form of an interest rate cut to more difficult times. As for the report on retail sales, it failed, as expected. Experts already expected a decline in the growth rate to 2.1% in annual terms, and a monthly increase of 0.3%. In practice, it turned out that the annual growth rate fell to + 1.0%, and in monthly terms, sales volumes decreased by 0.6%. It is clear that such data can not be called anything other than "failure". Thus, the British currency and the UK economy, at the end of today, remained in its usual state. We can continue to insist that the fair rate of the British pound against the dollar is much lower than current price values. In the last two months, when the pound showed almost recoilless growth, we thought that it was, to put it mildly, strange. It is clear that this strengthening of the British currency was justified fundamentally, from the faith of traders in the victory of the Conservatives and the early completion of the Brexit procedure. However, as the election passed, the euphoria subsided, and traders returned to the harsh everyday life. And this life is the macroeconomic statistics from the UK failing from time to time. Boris Johnson is ready not to sign any agreements with the European Union, making the British economy continue to slow down and suffer from all that is happening. At the same time, the US economy continues to show signs of acceleration and stable growth, which is in favor with the US currency. If we add here the monetary policies of the Bank of England (which is on the verge of lowering rates) and the fed (which is not going to lower the rate in the near future), it is obvious that the US monetary policy is stronger.
Meanwhile, Scottish National Party leader Nicola Sturgeon has written to UK Prime Minister Boris Johnson asking for powers to hold a second referendum on Scottish independence. We have repeatedly noted that the Scottish people were initially against Brexit, against any plans of Boris Johnson, and wanted to stay in the European Union. However, now that it has become clear with almost 100% probability that the "divorce" will take place, Scotland wants to separate from the UK. The problem though is that Boris Johnson's government is not obliged to endorse such an initiative especially after in 2014, a similar referendum was already held in Scotland and a majority of vote was taken on remaining in the UK. In a letter to Boris Johnson, Nicola Sturgeon justified the country's desire for a referendum and said that "last week, Scotland made it clear that it does not want a Tory government led by Boris Johnson to take us out of the European Union." However, Boris Johnson himself, of course, is not going to support the referendum. He has previously stated with a fair degree of cynicism that " the referendum has already been held in 2014, its results should be respected, and such an event can only happen once in a century." Sturgeon told Johnson: "Everyone in Scotland knows that a second referendum on independence will take place, and the victory of the Scottish party in the election clearly indicates that we want to determine our own future, and not allow Boris Johnson to impose one way or another on us." Thus, relations between Scotland and the UK could deteriorate significantly, especially since Nicola Sturgeon's plan to stay in the European Union is supported by the Brussels, which will provide all possible assistance and support to the Scots.
Trading recommendations:
GBP / USD continues to form a new downward trend. The price easily overcame the lower boundary of the Ichimoku cloud and the first support level of 1.3083. Therefore, at the moment, the targets for selling the pound are at the levels of 1.2988 (the level of average volatility on December 19 based on the last 30 trading days) and 1.2833. It is recommended to return to purchases of the British pound not earlier than the reverse consolidation of the price above the Kijun-sen line, which is clearly not expected in the coming days.
Explanation of the 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.
Chinkou span - green line.
Bollinger Bands Indicator: 3 yellow lines.
MACD: The red line and the histogram with white bars in the indicators ' window.
Support/resistance levels classic: Red and gray dotted lines with price symbols.
The pivot-level: Yellow solid line.
Levels of support/resistance, taking into account the volatility: Gray dotted lines without price symbols.
Possible variants of the price movement: Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com