Overview of the GBP/USD pair. March 6. EU-UK negotiations: the mood of Michel Barnier has changed

4-hour timeframe

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Technical details:

Higher linear regression channel: direction - downward.

Lower linear regression channel: direction - downward.

Moving average (20; smoothed) - upward.

CCI: 154.6517

The fourth trading day ended with an upward movement for the pound/dollar pair. No important macroeconomic reports were published in the UK and America yesterday. However, both the euro and the pound rose against the US dollar throughout the day. The US stock market started to recover, however, this did not prevent traders from continuing to get rid of the dollar. When paired with the pound, the picture is certainly not as sad as when paired with the euro. First, the GBP/USD pair shows at least some rudiments of logic in its movements. Secondly, traders of the GBP/USD pair do not just buy a counter-dollar currency, ignoring statistics and fundamental events. It should also be noted that the pair remains in the "swing" mode with a slight downward slope. Therefore, a small upward movement does not contradict the general trend at all.

Moreover, the first stage of negotiations between London and Brussels on a trade deal has ended today. Earlier, Michel Barnier and many other diplomats and experts have repeatedly stated that there is almost no chance of reaching an agreement with London during 2020. As an example, trade deals with Canada or Australia, which were negotiated for many years, were cited. However, after the first stage of negotiations, Michel Barnier was surprisingly optimistic. He said that "the dialogue is being conducted in the direction of rebuilding cooperation between London and Brussels." According to Barnier, the EU is interested in creating a free trade zone with Britain without using duties and quotas. "We have launched 11 areas of negotiations with the UK in various areas, with the exception of foreign policy and defense, because the British side has notified us that it does not want to discuss these issues. However, we remain open to discussing them in the future, if London wants it," said the EU's chief negotiator. Michel also gave a generally positive assessment of the first days of negotiations and said that "it will be very difficult to reach an agreement, but it is quite real." However, Mr. Barnier also noted "a lot of differences in points of view on the same issues," and these differences are "very serious." These serious differences relate mainly to four areas. First: the UK does not want any legal rules in competition between British and European businesses. Second: London refuses to comply with the European Convention on human rights, as well as to recognize the decisions of the European court of human rights, which puts an end to police cooperation between the EU and the UK. Third: London wants to conclude a series of agreements with Brussels on various areas of cooperation, while the European Union wants to sign one extensive and comprehensive association agreement. Fourth: the topic of fishing in British waters. The EU wants to get access to fishing near Britain and detail quotas for marine zones and fish species, and the UK insists on the principle of equal access to each other's waters. In general, we can draw the following conclusion: negotiations have begun and this is already good; the negotiations did not fail immediately at the first stage (which could not be completely excluded, given the position of Boris Johnson) and this is also good; Michel Barnier's restrained optimism also gives hope that the parties will still be able to come to a common denominator and a "hard" Brexit will be avoided. Against this background, the British pound is trading higher at the end of the trading week.

However, do not forget that the pound is not getting more expensive non-stop like the euro, so tomorrow the US statistics may provoke a resumption of downward movement if reports on Nonfarm Payrolls and wages for February will be higher than the forecast values. From a technical point of view, the upward movement continues but a downward reversal of the Heiken Ashi indicator will indicate the end of the upward movement. Both linear regression channels are directed downward, so the medium and long-term trends remain downward.

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The average volatility of the pound/dollar pair over the past 5 days is 124 points per day. However, on average, the pair's quotes are now about 105-110 points per day. Thus, 200 points of volatility last Friday is not a pattern for the pound at this time. On Friday, March 6, we expect the pair to move within the volatility channel of 1.2827-1.3075. The pair is likely to move towards the upper limit, however, we remind you that a fairly strong drop may begin within the "swing". Especially if the macroeconomic statistics from overseas will please the bears.

Nearest support levels:

S1 - 1.2939

S2 - 1.2878

S3 - 1.2827

Nearest resistance levels:

R1 - 1.3000

R2 - 1.3062

R3 - 1.3123

Trading recommendations:

The GBP/USD pair continues its upward movement. Thus, it is now recommended to buy the pound with the targets of 1.3000 and 1.3062, but in small lots, since both channels of linear regression are still directed downwards. We still do not expect strong growth in the British currency. It is recommended to sell the pound again with the targets of 1.2827 and 1.2756 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