Hourly chart of the GBP/USD pair
The situation with the GBP/USD pair got a little confusing on the third trading day of the week. There are too many factors that should be considered in order to successfully predict long-term movement. The key event of the past day was an article by the British publication The Daily Telegraph, in which the author, referring to a high-ranking official in the British government, wrote that with a high degree of probability, London and Brussels will not reach an agreement on Brexit. This means that trade between the UK and the European Union after the transition period will be carried out according to the rules of the World Trade Organization. Why is it so important to the pound sterling? The British economy has suffered several major blows in recent years. Leaving the EU after a 47-year stay is not an easy matter. We will have to break the ties that have developed over the years and decades, break the contracts between European and British companies. All this significantly worsened the prospects of the British economy even at the preliminary stage, which lasted for a total of three years. All this time, Britain continued to pay contributions to the EU treasury and tried to find a way to leave the EU as gently as possible so that the economic consequences would not be devastating to its own economy. As we can see now, it didn't work out. In addition, the British economy was hit by the coronavirus crisis, which rode like a roller throughout Great Britain. And if Britain loses its free trade deal with the EU from January 1 2021, this promises further losses and losses to its economy. And the weaker the economy, the weaker the national currency. British Prime Minister Boris Johnson will strive to conclude trade agreements with both the EU and the US, but so far all these are just talks and plans. We remind you that it can take several years to negotiate a trade agreement. Thus, this is not a near-term perspective.
Technical analysis enables the British currency to strengthen. If the price overcomes the 1.2734 level, it will be able to continue its upward movement. Moreover, now there is an upward trend line (the line that supports the growth of the pair, on the chart - red). The trend will change if the price consolidates below it for an hour. Based on technical constructions, there are two possible scenarios for the development of events:
1) If the current intermediate target of 1.2734 is overcome, then we will have the right to expect a continuation of the upward movement to the 1.2812 level, which is the June 10 high. Stop Loss level can be placed 30 points below the current price. We place the Take Profit order just below the level of 1.2812.
2) But sales, from our point of view, are now risky to consider. We believe that it is possible to sell the pound/dollar pair after consolidating below the trend line. In this case, you are advised to consider the levels 1.2623 and 1.2519 as targets for the downward movement.
Important speeches and reports (always contained in the news calendar) can greatly affect the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners in the forex market should remember that every trade cannot be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
The material has been provided by InstaForex Company - www.instaforex.com