Hot forecast and trading recommendations for GBP/USD on June 18, 2020

The pound formally weakened yesterday, but the scale of its decline was rather symbolic. So it's not about the decline itself, but why it was practically nonexistent. At the same time, the statistics, in general, came out exactly as expected. So the reason for it is not found in macroeconomic statistics. And the answer to this question lies in Brexit. More precisely, yesterday there was at least some specifics regarding the very concessions that the European Union is supposedly ready to make regarding the trade part of the agreement. And this made investors seriously think and stop. According to Ursula von der Leyen, who heads the European Commission, the EU is ready to make some concessions on the issue of fishing, as well as reducing the role of the European Commission in the issue of its impact on economic and trade policy. However, she did not specify these issues. It is not completely clear as to what exactly could be the concessions on the part of the EU. Just as it is not clear what kind of concessions Britain is ready to make. There are too many questions. Nevertheless, at least something became known, which means that it is worth waiting for further clarifications. Consequently, the market simply froze in anticipation of answers to questions.

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At the same time, one should not overestimate the significance of macroeconomic data published yesterday. Especially in the UK itself. Of course, inflation fell from 0.8% to 0.5%. But investors did not see anything new. Ever since the publication of the preliminary assessment, everyone knew about this decrease, and even then they laid it in the value of the pound.

Inflation (UK):

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Although, US data showed signs of an improvement in the state of the construction industry, but not as expected. In particular, the volume of construction of new houses did not increase by 17.8%, but only by 4.3%. Which, after almost two-fold reduction in construction volumes that lasted three months, looks rather modest. The number of issued building permits has increased by as much as 14.4%. They expected growth by 12.4%. So the actual data did not greatly exceed forecasts. In other words, the dollar had reasons to grow.

New Home Construction (United States):

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Even Brexit is fading into the background today, since the Bank of England board meeting is in the center of attention, during which a decision can be made to expand the quantitative easing program. More precisely, no one doubts that a decision will be made. But the question of interest rates is open. The fact is that recently there has been increased talk that the BoE still has room for maneuver. And of course, I mean that the BoE has the opportunity to reduce the refinancing rate, since it is not zero. Although the further expansion of the quantitative easing program is in itself a negative factor, if the BoE supplements this decision with hints of the possibility of lowering the refinancing rate in the future, the pound will quickly weaken.

Bank of England Refinancing Rate (UK):

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In terms of technical analysis, we see that the corrective move from the range level of 1.2770 still takes place in the market where the quote has been concentrated within the periodic level of 1.2500, forming as an accumulation in the range of 1.2510/1.2565.

Concerning the emotional mood of the market, one can see speculative activity on a systematic level, which almost gives the market high activity on a daily basis. It is worth noting that the 1.2500 area has repeatedly played the role of a support, and it currently causes the greatest interest among traders.

Considering the trading chart in general terms, the daily period, it is worth highlighting that the quote returned to the previous fluctuating range of 1.2150 /1.2350//1.2620, which suggests the resumption of the old magnitude.

We can assume that the accumulation process in the range of 1.2510/1.2565 will end today, where the upcoming Bank of England meeting could burn up speculative interest, which will give the market a new round of volatility. Regarding trade transactions, you can use the tactic of breaking the established boundaries with entry to local operations.

Specifying all of the above into trading signals:

- Short positions, we consider lower than 1.2500, towards 1.2450. If the price is recorded lower than 1.2440, it is possible to consider the move to 1.2400-1.2350.

- Long positions, we consider higher than 1.2585, towards 1.2620-1.2650.

From the point of view of a comprehensive indicator analysis, we can see that the indicators of technical instruments on hourly periods have a variable downward interest due prices being concentrated near the level of 1.2500. The daily sections are still working on an inertial upward track.

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