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Overview of the GBP/USD pair on January 2. We expect the pound to fall by 100-120 points in the coming days.

4-hour timeframe

analytics5e0dac67ed84a.png

Technical data:

The upper channel of linear regression: direction - up.

The lower channel of linear regression: direction - down.

The moving average (20; smoothed) - up.

CCI: 128.9549

The British pound in the last days of the past year also rose in price paired with the US currency and added about 300 points. Just like the euro currency, this growth was not supported by any fundamental factors, macroeconomic events, and so on. Thus, just as in the case of EUR/USD, we believe that now is the time for the pound to resume the downward trend with a fall, at least, to the levels of 1.2900 and 1.2800. Of course, theoretically, if the pound continues to enjoy increased demand, then the growth of the pair will continue. All also without any fundamental grounds. However, we believe that traders will still return to the usual trading mode, using logic. Thus, today or tomorrow, the pound-dollar pair may begin a correction to move, and in the future, it may be closed under this line with a change of trend to a downward one.

For the pound, by the way, the most important year in recent decades has come. The last three years have been completely linked to the procedure for bringing Brexit through Parliament. 2020 will be associated with the UK's exit from the European Union and all the consequences of such a step by the government of Boris Johnson. In principle, we have repeatedly noted that in any case, the British economy will be hit hard. In any case, Britain will face geopolitical problems such as riots on the island of Ireland, Scotland's desire to leave the United Kingdom through an independence referendum, problems with the Spanish government on the issue of Gibraltar, and so on. But if Boris Johnson still fails to reach an agreement with Brussels on trade relations after 2020, it will be an additional blow to the British economy. Thus, in the last months of 2019, the British pound has risen in price and this growth is a great acceleration for the pair and traders begin new mass sales of the British currency. There are no other fundamentally justified scenarios for the pound.

Today, by the way, the UK will publish the index of business activity in the manufacturing sector for December. As you might guess, the forecasts are again disappointing. A value of 47.6 is expected, compared to the previous month's value of 47.4. As we can see, a small improvement is possible, but not so strong that we can state the "recovery" of the industry. Thus, the general state of things in the manufacturing sector will not change, and the pound is unlikely to receive support based on this macroeconomic report. Moreover, as in the case of the euro, we believe that it is time for the pound to "pay off its debts" a long time ago. We still believe that the clouds are "gathering" over the UK, and the growth of the British pound in the last three months is just a New Year and Christmas gift to the currency from traders. Already at the beginning of this year, in its first months, we are waiting for the resumption of the downward trend and believe that it will be quite strong. Throughout 2020, the multi-year lows of the British currency may be updated. As a result, we recommend waiting for the technical indicators to turn down, especially since the lower linear regression channel has already performed such a turn. Now it is necessary to overcome the moving average line with the change of the trend to a downward one, after which it will be possible to consider short positions again.

analytics5e0dac80e663b.png

The average volatility of the pound-dollar pair over the past 5 days is 104 points, remaining at a fairly high level. According to the current level of volatility, the working channel on January 2 is limited to the levels of 1.3146 and 1.3354, and we believe that the pair will strive for its lower border.

Nearest support levels:

S1 - 1.3184

S2 - 1.3123

S3 - 1.3062

Nearest resistance levels:

R1 - 1.3245

R2 - 1.3306

R3 - 1.3354

Trading recommendations:

The GBP/USD pair is currently continuing its upward movement. Thus, traders are advised to stay in the pair's purchases with the targets of 1.3245 and 1.33306 until the Heiken Ashi indicator turns down. It is recommended to return to the sales of the pound-dollar pair not earlier than the reverse consolidation below the moving average line with the first goal of 1.3000.

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 upper channel of linear regression - the blue lines of the unidirectional movement.

The lower channel of linear regression - the purple line of the unidirectional movement.

CCI - the blue line in the indicator regression window.

The moving average (20; smoothed) - the blue line on the price chart.

Murray levels - multi-colored horizontal stripes.

Heiken Ashi - 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