4-hour timeframe
Amplitude of the last 5 days (high-low): 69p - 89p - 52p - 63p - 53p.
Average volatility over the past 5 days: 65p (average).
The GBP/USD currency pair followed the example of the European currency today and made an impressive jump, reaching a psychological mark of 1.3000. It seems that after a lull for a month and a half, traders began to return to the market. However, the time has not yet come for such conclusions. First, market participants continue to ignore any macroeconomic statistics from the United States and the United Kingdom. Secondly, the resistance area of 1.2970–1.3010, from which the pair has bounced several times in the last two months, has not been overcome, which means there may be another rebound from it. Thirdly, it is not clear why a tangible upward movement began today?
An index of business activity in the UK construction sector was released today, which showed a slight improvement (45.3 against 44.2 a month earlier). However, as in the case of business activity in the industrial sector, the construction industry is still experiencing a decline, so the "improvement" is quite formal. There were no more macroeconomic publications today, and we believe that the rise of the pound is completely unrelated to the publication of the business activity index.
But, of course, this takeoff may be connected with the arrival of Donald Trump to London, who manages to "light up" absolutely everywhere, comment on absolutely all the events in the world, ignite several trade wars, criticize Jerome Powell and the Federal Reserve while also supporting "his friend" Boris Johnson . It was the support of Johnson and Brexit that Trump took on his arrival in London. "Boris Johnson is very capable, and I think that he will do an excellent job," Trump said and expressed confidence that it was Johnson's party who would win a landslide election. But French President Emanuel Macron fell under a flurry of criticism: "France needs NATO more than other countries, and the United States needs this alliance the least. A very dangerous statement from France. And it's very strange - they've got everything wrong with the economy, and for some reason they have such phrases about NATO," Trump said in response to Macron's words about " NATO's dead brain." Thus, the pound could react to Trump's support of Johnson in the election. Or the rising ratings of the Conservative party...
According to recent studies, the advantage of Conservatives over Labour has increased to 12%. Again, we would like to note that any opinion polls always have an error, and the opinion of the UK population may change. It is not at all surprising that the Conservatives took the lead even more after Johnson criticized the Labour Party for the law it adopted in 2003, which gives criminals convicted of terrorist activity the right to early release. According to Johnson, it was this law that caused the tragedy on the London Bridge. The prime minister did not cover the fact that the murdered terrorist is not the only terrorist in the world. There is also the fact that this law could be repealed under the ruling Conservative Party even before the tragedy. The Labour Party was put in a disadvantageous light, which affected their political ranking. However, hopes that Johnson's party will not succeed in forming a ruling majority still remains. According to many experts, if the advantage of Conservatives drops to 7%, then the Tories will not be able to take the majority of seats in Parliament. In this case, it will be necessary to consider how many votes the Conservatives + deputies of the Brexit party and the Labour Party + Scots + Social Democrats will collect. Such coalitions could be formed to continue the Brexit war in the new Parliament. Thus, Tory's advantage remains, but it is very shaky, and Trump's visit to London can be used by Labour to cast a shadow over Conservatives, whose leader does not hide his friendship with the American president, who is not very loved in the UK.
Well, the prospects for the pound, for the reasons that we covered in the morning article, remain extremely vague. There are a sufficient number of reasons for this and all are connected with Brexit and with the UK's life after Brexit. From a technical point of view, the pound/dollar pair has overcome the resistance level of 1.2976 and can now continue to move up, but we believe that correction will begin tomorrow, and the pair will not be able to overcome the area of 1.2970 - 1.3001.
Trading recommendations:
GBP/USD continues to move upward as part of a sideways trend. However, it is not advised to buy the pound at the moment, since quotes have not yet been able to leave the area above 1.2970 - 1.3010. If the bulls still manage to break higher, then it will be possible to consider buying the pound/dollar pair while aiming for 1.3025 and 1.3052. Selling the pair is now impractical, from the point of view of technical analysis, since the price is located above all the lines of the Ichimoku indicator.
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