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Overview of the GBP/USD pair. July 8. "Trump is part of a coronavirus disaster." The European Commission lowered its forecasts

4-hour timeframe

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Technical details:

Higher linear regression channel: direction - upward.

Lower linear regression channel: direction - downward.

Moving average (20; smoothed) - upward.

CCI: 179.4777

The British pound resumed a strong upward movement in the second half of the past day and overcame the Murray level of "5/8"-1.2512, which we called key for the prospects of the British currency. Thus, the bulls showed their best side, in contrast to the bulls on the euro/dollar pair. We just need to figure out what caused the sharp increase in demand for the British pound on Tuesday, July 7. After all, in recent days, only negative news has been coming from the UK, mainly concerning negotiations on a free trade agreement. At the end of last week, negotiations again failed, top EU officials again condemned London, saying that Britain does not want to sign a compromise agreement, and the EU is not going to sign it "at any cost." A little later, the representative of the European Commission Paolo Gentiloni warned the UK and the EU that if an agreement is not reached, it will be an additional blow to both the European and British economy. Current, far from optimistic forecasts for 2020 and 2021 implies that a trade agreement will be concluded. If not, the EU's GDP may be much weaker in 2021 than the 5% expected now. Thus, the British pound has nothing to be happy about. However, the reasons for the strengthening of the pound should be found in Britain, since the euro currency has not risen in price in pair with the dollar.

Let's return to the Brexit negotiations, which unexpectedly resumed in London today. According to most experts, the current probability of reaching an agreement between London and Brussels does not exceed 10%. And this value, which is already low, falls as the end date of the "transition period" approaches. Both chief negotiators reiterated that "the parties are too far from understanding", as well as "significant differences in positions". German Chancellor Angela Merkel said that all 27 EU countries should prepare for a no-deal Brexit. Well, Boris Johnson continues to assure that the agreement, which took 7-8 years with other countries, can be reached in about a month. By the end of July, the British Prime Minister is going to agree on everything with Brussels. How this is possible is clear only to Boris Johnson. Meanwhile, British businesses that are experiencing serious problems due to the "coronavirus crisis" are calling on the British government to let them know as soon as possible whether there will be an agreement with the EU or whether it is time to launch emergency action plans in case of emergencies. UK businesses have suffered from a lack of understanding between London and Brussels in the past few years, with some companies moving their offices and factories outside of the Foggy Albion, however, there was still hope that the parties would agree. Now, only ardent optimists can believe in reaching an agreement between Brussels and London. The key differences remain the issues of competition between British and European companies, the judicial issue, the issue of fishing in British waters by European sailors, as well as the issue of compliance with European norms and standards. Thus, there was no positive news for the British pound.

Moreover, the European Commission lowered its forecasts for UK GDP for 2020. According to the European Commission, the British economy will shrink by 9.7% in 2020, and not by 8.3%, as expected in March. According to the calculations of the European Commission, in the second quarter of 2020, British GDP lost 18.2%, which is more than that of any EU country. The forecast of economic growth for the UK for 2021 remained unchanged and is +6%, but only if a free trade agreement is concluded with the European Union. Otherwise, the recovery of the British economy will be slower and weaker. "The recovery in company investment is expected to be slower due to the pressure on balance sheets as a result of the COVID-19 pandemic and uncertainty around the future trade relationship between the EU and the UK," the European Commission said in a report. Also, the European Commission believes that even if the agreement is concluded, it will not be as profitable for both sides as it is now. This means that this will lead to negative consequences that will be more pronounced for Britain than for the European Union, the report says.

As we said in earlier articles, Donald Trump is now mercilessly criticized by half of America and it will be difficult for him to win the election. Many officials, who are known throughout America, openly blame the American President for the fact that COVID-2019 infected about 3 million Americans and 130 thousand deaths. New York mayor Andrew Cuomo openly stated that the US leader contributes to the spread of the "coronavirus". Cuomo recalled that it was Trump who at the beginning of the epidemic repeatedly stated that "in 99% of cases, the virus does not carry any danger", and that "it will not live even until the summer". According to Cuomo, this led to the fact that the Americans did not observe the quarantine. The mayor of New York said that "Donald Trump is part of the disaster that we are in".

Trump's political ratings are also bad. According to the latest polls, Joe Biden's advantage remains at around 10%. It is noted that the research was conducted by both Democrats and Republicans and gave approximately the same results. It is especially important that "wavering states" like Wisconsin, Arizona, and Florida, which in 2016 secured a victory for Trump, this time intend to vote for Biden. Many political analysts also note the fact that in some ways, Trump was just unlucky. Many Americans who do not support Trump have nothing personal against him, however, they are opposed to events related to the US President. And this is the trade war with China, "coronavirus", racial protests and rallies, high unemployment, and so on. However, political analysts also advise not to write off Trump ahead of time from the accounts. Many believe that the situation may still change before November. Experts believe that one of the main advantages of Trump, which can still help him win, is the fulfillment of his campaign promises. It was Trump who was able to build a tough dialogue with China on trade injustice, and migration policy was also changed. But Trump still has a lot of problems. One of them is racial. Many experts believe that the black population of the United States can come to the elections with only one goal – to prevent Trump from winning by casting their votes for Biden.

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The average volatility of the GBP/USD pair continues to remain stable and is currently 88 points per day. For the pound/dollar pair, this indicator is "average". On Wednesday, July 8, thus, we expect movement within the channel, limited by the levels of 1.2459 and 1.2635. Turning the Heiken Ashi indicator downward will indicate a new round of downward correction.

Nearest support levels:

S1 – 1.2512

S2 – 1.2451

S3 – 1.2390

Nearest resistance levels:

R1 – 1.2573

R2 – 1.2634

R3 – 1.2695

Trading recommendations:

The GBP/USD pair continues its upward movement on the 4-hour timeframe. Thus, today it is recommended to buy the pound/dollar pair with the goals of 1.2634 and 1.2695 and keep them open until the Heiken Ashi indicator turns down. It is recommended to sell the pair after fixing the quotes below the moving average with the first goals of 1.2390 and 1.2329.

The material has been provided by InstaForex Company - www.instaforex.com