4-hour timeframe
Amplitude of the last 5 days (high-low): 65p - 66p - 50p - 82p - 108p.
Average volatility over the past 5 days: 75p (average).
The GBP/USD currency pair began a new round of correction movement less than 12 hours before the results of voting in the UK become known. There were no important macroeconomic publications today either in the UK or in the United States, and, in principle, it doesn't matter, since the pound has not responded to any macroeconomic statistics for the last two months, completely focusing on the parliamentary elections, which they consider crucial. The correction of the pound/dollar pair is connected with the banal desire of traders to be certain before the appearance of decisive data. As we wrote a day earlier, with a 80% probability, the party of Boris Johnson will win the election with the necessary advantage, which will create a "majority government". However, there remains a 20% probability that the Conservatives will not be able to get the necessary advantage, then the Parliament will again be in limbo, like Brexit. In theory, such a scenario has a 20% probability. In practice, the likelihood of a Conservative defeat is much greater. The fact is that in at least 100 out of 650 districts, the difference in the political ratings of Corbyn and Johnson is literally a couple of percent. That is, the regions that unequivocally support the leader of the Labour Party or the leader of the Conservative Party are known in advance. It is on the data from these regions that the majority of forecasts of the outcome of the vote are built. But as we have already mentioned, about a hundred regions are hesitating, which means that potentially as many as 100 deputy mandates can be on either side or the other. That is why we are not sure of the victory of Johnson.
Moreover, let's focus on the "homespun truth". Johnson needs a majority of votes in Parliament. His party was ruling even before the current election, but this did not make it possible to realize Brexit, since there were not enough votes all the time. Even at the expense of the allies. Given the fact that the Conservative Party's own forces amounted to about 290 deputies (after all the dismissals and expulsions from the party), then Johnson could not even collect 37 additional votes to accept the Brexit deal. Thus, Johnson needs an unconditional victory in this election, any other result will not solve the problems for which the re-election was started by the prime minister. Also, do not forget that of the allies, the Conservative Party only has the Brexit Party, which will receive an extremely small number of votes in Parliament due to its low popularity in the UK. Nigel Faraj and his party members propose a "hard" Brexit script that is not welcomed by almost all UK residents. Thus, even a coalition with the Brexit party will not bring Johnson a large number of additional votes. So, you need to win on your own. The Labour camp is a completely different matter. Both Liberal Democrats and Scots can support the initiatives of Jeremy Corbyn (the main of which is to prevent Brexit in the form of Johnson's deal). Accordingly, there aren't many Laborites and need a victory in the elections. If Johnson's party fails and does not form a majority government, then everything is practically guaranteed to come to a second referendum, since there is simply no way out of this situation. And almost all opposition parties can help block Johnson's agreement once again.
Thus, in this situation, it is best to wait for the morning voting results and then build any trading plans for the coming days. The upcoming weekend is an opportunity to move away from any outcome of the vote and calm down. Starting next Monday, the pound/dollar currency pair can be traded in the usual way.
Trading recommendations:
GBP/USD has started a downward correction, which may develop into a full-fledged downward trend. Especially if the Conservative Party does not win the parliamentary elections. Thus, it is now recommended to wait until the situation becomes clear and only after that will you resume trade, depending on the election results and the technical picture at that time.
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