4-hour timeframe
Amplitude of the last 5 days (high-low): 81p - 60p - 44p - 77p - 106p.
Average volatility over the past 5 days: 74p (average).
The British pound does not want to correspond to the fundamental background, which has long hinted at a strong decline in the British currency. Traders are still impressed by the possible significant victory of Conservatives in future elections, which will allow Boris Johnson to freely implement Brexit and put an end to the three-year epic of a "divorce" with the European Union. What are the reasons for traders to assume just such an option? Only sociological polls and studies that show that the Conservative Party's rating is growing, the Labour Party's rating is also growing, but at a slower pace, while the rest of the parties are losing their popularity. However, the gap between Conservatives and Labour does not widen and remains at 12-15%. We remind you that even if the current rating of the party of Johnson is about 43%, this does not mean that his party members will get 43% of the 650 seats in the British Parliament. Thus, we still recommend not to be in a stage of prematurity and unreasonable euphoria, so that you do not get upset because of unfulfilled dreams.
During the first trading day of the week, the British pound managed to rise by 70 points, which is seen as out of the blue" There were no important macroeconomic publications during the day in either the UK or the US. Thus, traders could only respond to the general news background, which comes from regular media and periodicals, which now can only announce the course of election campaigns or how the rating of a political party has changed. That is, it turns out that today's strengthening of the British currency is again connected with the confidence of most traders in the victory of Conservatives in the elections, and not with macroeconomic statistics, which in the UK have been absolutely disastrous in the last 3-4 weeks. Last week, it became known that business activity in the service sector also slipped into the region below 50, as in the industrial sector. What is now to be expected from indicators of GDP, inflation, wages, industrial production? But macroeconomic statistics now have no effect on the pound. Traders were determined to wait for the results and elections and certainly see the Conservatives win at them. Assuming what happens to the pound if the Conservatives do not win enough parliamentary seats is not difficult. The pound has no actual reasons for growth, but a whole set of reasons and factors for the fall. If the assumption about the Conservatives' defeat or their insufficiently convincing victory comes true, then the pound may plummet back to multi-year lows and even lower. Furthermore, due to weak macroeconomic statistics, which traders can suddenly remember, and because of a sharp drop in the chances of completing the Brexit procedure in January.
In addition, it will not be superfluous to think about the future value of the pound sterling in the foreign exchange market if the "divorce proceedings" nevertheless ends in January. This will be followed by long and difficult negotiations between the European Union and Britain regarding future trade relations between them. Negotiations with the US will begin, with which Johnson really wants to conclude a huge trade deal. However, as recent events show us, trading deals are not fast. The process can take several years, and as long as it lasts, the economy of any country that is not even involved in a trade conflict may show signs of a slowdown. Thus, if the Conservatives win, then the pound, according to various experts, will increase to $1.32–1.34. However, there will be full of possible reasons for disappointment among investors in 2020.
Well, the last thing that needs to be reported: The British Parliament will resume its work five days after the re-election, that is, September 17th. A legislative agenda will already be worked out on the 19th, and by December 25 a proposal will be put to the vote on a deal between Johnson and the European Union. That is, in theory, before the New Year we will find out how Johnson's third attempt to push his agreement through Parliament ends.
The technical picture of the pound/dollar pair resembles a frank flat more and more, which is clearly visible on the 24-hour timeframe. Quotations cannot fall below the level of 1.2780, above the level of 1.2970 they also cannot continue to grow. So it turns out that the pair is clamped into a side channel wide enough for a 4-hour timeframe. Hopes for a continued downward movement after the Friday impulse, it seems, are not destined to come true. Thus, we continue to wait for the elections and keep a flat in mind.
Trading recommendations:
GBP/USD started to move down, but very quickly finished. Thus, traders are encouraged to consider selling the pound this week with targets at 1.2826 and 1.2780 if quotes return to the area below the Ichimoku cloud. It is not recommended to buy the pound/dollar pair yet, as fundamental factors indicate a downward trend, and bulls are not able to consolidate the pair above 1.2980.
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 indicator window.
Support / Resistance Classic Levels:
Red and gray dotted lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movement options:
Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com