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Overview of the GBP/USD pair. March 5. Joe Biden wins in most states. The pound is growing again on a "swing"

4-hour timeframe

analytics5e604e4b549cc.png

Technical details:

Higher linear regression channel: direction - downward.

Lower linear regression channel: direction - downward.

Moving average (20; smoothed) - sideways.

CCI: 38.2849

"Downward swing" - this phrase can be used to describe the movement of the pound in the last two and a half months. After the political epic with the re-election to the UK Parliament has ended, the pound is inclined to fall against the US dollar. As if waiting for confirmation of its weakness to continue the decline with new strength. The most interesting thing is that even after the Fed rate cut by 0.50%, nothing has changed much in the balance of power between the dollar and the pound. The British currency is still "afraid" of a failure in negotiations with the European Union, the lack of a trade deal, a "hard" Brexit and the short-sighted policy of Boris Johnson. The Bank of England's monetary policy is still more dovish than the Fed.

Since no macroeconomic publications are scheduled in the United Kingdom and the United States for Thursday, March 5, I suggest that we move away from the economy a little. Moreover, now traders only need to wait. Wait for information about the progress of the UK-EU negotiations. Wait for new information about the spread or containment of the "coronavirus". Wait for new performances by Mark Carney and/or Andrew Bailey. Wait for the Bank of England to act, which looks like it will finally lower the key rate. And it is not a fact that any of these events will cause the currency pair to move and start active "body movements" again. The downward trend has continued in recent months, however, it is not strong or confident. We have already said before the events of the last week that the fundamental position of the pound remains extremely weak all because of the same Brexit, the small probability of a trade agreement between Britain and the EU and between Britain and the States. Now there is only one topic for discussion and analysis in the world - the spreading "coronavirus" and the fight against it in medical and economic terms. As we have already said, the euro/dollar currency pair is moving extremely illogically and chaotically. The pound/dollar is trading more calmly, however, it does not react to macroeconomic and fundamental events, which leads us to the conclusion that the movement of this pair is illogical. Based on this, technical factors are now coming to the fore.

At the same time, we have recently moved too far away from politics. While passions raged in the States for the impeachment of Donald Trump, almost every day all the media and periodicals counted the probability of Trump's removal from office, the probability of Trump and Biden winning the presidential election. Then all these topics subsided, although they are quite important in themselves. As you can see, Donald Trump even in the issue of reducing the key rate of the Fed is getting his way, though with the help of a worldwide epidemic. The Fed's interest rate has been reduced by a total of 1.25%, but Trump does not want to stop there and continues to put pressure on Jerome Powell. The US President believes that now is a great time to "get out in the lead" and says that rates should be "at zero or lower" to start refinancing the national debt, however, "because of the blockheads, the States are missing this unique opportunity."

Meanwhile, former US Vice President Joe Biden won the internal party election for the 2020 Democratic presidential candidate. In most of the States where votes were held, he was ahead of Michael Bloomberg and Bernie Sanders. Thus, in July, it is likely to be officially announced that the democratic presidential candidate will be Joe Biden. It remains only to understand what the ratings of Biden and Trump are at the moment and what trend they have.

Well, to top it off, I must say that today's speech by Mark Carney can equally cause a reaction from market participants and not cause it. At the end of the previous trading day, the pound again shot up, although the reasons for this can only be guessed. From a technical point of view, the consolidation over the moving has changed the current trend to an upward one, however, the "swing" remains. Therefore, we would not recommend waiting for a strong growth of the pound. Although it may well grow to the level of 1.3000. In the daily timeframe, the "swing" is more clearly visible.

analytics5e604e6004a87.png

The average volatility of the pound/dollar pair over the past 5 days is 120 points. However, if we consider the last abnormal Friday, this figure does not exceed 90-100 points. Thus, Friday's 200 points are not a pattern for the pound at this time. On Wednesday, March 5, we expect the pair to move within the volatility channel of 1.2747-1.2987. This pair is likely to be towards the upper limit.

Nearest support levels:

S1 - 1.2817

S2 - 1.2756

S3 - 1.2695

Nearest resistance levels:

R1 - 1.2878

R2 - 1.2939

R3 - 1.3000

Trading recommendations:

The GBP/USD pair started an upward movement. Thus, it is now recommended to buy the pound with the targets of 1.2939 and 1.2987, but in small lots, since both channels of linear regression are directed downwards. We do not expect strong growth of the pound yet. It is recommended to sell the British currency again with the targets of 1.2756 and 1.2695 if traders gain a foothold below the moving average line.

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

Explanation of the illustrations:

The highest linear regression channel is the blue unidirectional lines.

The lowest linear regression channel is the purple unidirectional lines.

CCI - blue line in the indicator window.

Moving average (20; smoothed) - blue line on the price chart.

Murray levels - multi-colored horizontal stripes.

Heiken Ashi is an indicator that colors bars in blue or purple.

Possible variants of the price movement:

Red and green arrows.

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