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GBP/USD. Results of February 25. EU has decided on the "basis" of a future deal with Britain

4-hour timeframe

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Amplitude of the last 5 days (high-low): 78p - 115p - 80p - 105p - 68p.

Average volatility over the past 5 days: 90p (average).

The GBP/USD currency pair continues to trade indistinctly, in different directions. For example, on the second trading day of the week, quotes of the pair resumed the upward movement, although there were no special reasons and grounds for this. Even the technical ones. The current picture did not require, for example, an upward correction, as in the situation with the euro currency. However, the pound is growing, again without reason. Today, traders managed to work out the upper line of the volatility channel on February 25th. If you look at the 24-hour timeframe, it becomes clear that since December 20, an absolutely slurred and non-trending movement has continued. Thus, trading on the pair is complicated by this particular factor - the lack of trend movement, although, of course, a certain downward trend (very weak) is taking place.

Meanwhile, the EU Council of Ministers today approved a mandate to negotiate with the British government as part of a future cooperation agreement after Brexit. According to sources in the European Commission, Brussels (as previously reported) will seek to conclude a comprehensive agreement with London on the basis of mutual obligations and fair competition between European and British companies. The European Union is ready to conclude an agreement with zero tariffs and duties, but it will also include a lot of points that determine the regulation of other areas of life, and not just trade relations. On the most controversial issue regarding fishing in British waters, the European Union proposes to conclude a separate bilateral deal, in which clear rules will be determined. Of course, the EU is not going to give up the opportunity to fish in British waters. It is also reported that the mandate of the European Commission concerns cooperation in areas such as intellectual property, government procurement, transport, energy, and security. In simpler terms, the EU lays down in a 46-page document the principles by which Michel Barnier will negotiate with Boris Johnson. That is, the European Union offers London zero quotas and tariffs only in exchange for the application of its own standards in the areas of state aid, competition, the social sphere, labor, ecology, climate, tax issues and so on ... Thus, the EU's position in future negotiations is absolutely understandable and it is radically opposed to the position of London.

It is absolutely obvious that the government of Boris Johnson will not like this mandate, and in the near future we can expect comments from top officials of the UK, which will probably say that London will not agree to such conditions in Brussels. Even in exchange for a soft trade deal. However, the question will be whether Boris Johnson is really ready to refuse to sign an agreement with the EU, considering what kind of blow will be inflicted on the economy in this case? After all, such an option could be justified if Johnson had already had a trade agreement with the United States on hand. However, with Donald Trump, you still need to agree. Given that the US president is a businessman to the bone, one can hardly expect that the United States will conclude an agreement that will be disadvantageous for them. Thus, it is far from a fact that Johnson will be able to agree with his "friend" Trump on the subject of trade relations. Recall that recently the "black cat" has already run before the heads of countries because of Huawei, which Trump is fighting with, but whom Johnson allowed to develop 5G networks in Britain. Thus, both potential trade agreements are "hanging in the air" and so far there is no information that would make their signing truly credible. In any case, we should now wait for comments from the British negotiating group, as well as the start of official negotiations.

From a technical point of view, the pound/dollar pair continues to trade in the "seesaw" mode with a low downward slope. We still believe that there are no good reasons for the British currency to sharply strengthen. The pound will receive a powerful support factor if Johnson manages to sign an agreement with the EU, since Brexit can really be considered soft. Otherwise, we expect the pound's quotes to collapse. The same as the euro/dollar was in the last month. Sooner or later, the bulls will stop resisting in the GBP/USD pair, since they have no macroeconomic support. Thus, in spite of overcoming the Kijun-sen and Senkou Span B lines, a downward reversal and the resumption of the downward movement may occur in the near future.

Trading recommendations:

GBP/USD pair began a new round of upward correction. Thus, it is recommended to sell the British pound with targets at 1.2850 and 1.2824 no earlier than the return of quotes of the pair below the critical line. We recommend that you consider buying the pair with a target of 1.3055 in small lots, since a downward turn could occur at any moment, and the fundamental background still does not support the pound.

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicators window.

Support / Resistance Classic Levels:

Red and gray dashed lines with price symbols.

Pivot Level:

Yellow solid line.

Volatility Support / Resistance Levels:

Gray dotted lines without price designations.

Possible price movements:

Red and green arrows.

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