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14.12.2020 04:55 PM
GBP/USD is volatile amid Brexit drama

Market participants fettered by how the Brexit negotiations are unfolding. However, experts say that traders might make a solid profit amid the panic across the market.

Britain and the European Union agreed on Sunday to "go the extra mile". Boris Johnson and Ursula von der Leyen gave negotiators another chance to strike a deal.

"Our negotiating teams have been working day and night over recent days. And despite the exhaustion after almost a year of negotiations, despite the fact that deadlines have been missed over and over we think it is responsible at this point to go the extra mile," Prime Minister Boris Johnson and European Commission President Ursula von der Leyen said.

The pound sterling jumped by 1% adding about 145 pips at the opening of the session. On the chart, it was displayed as a price gap.

After a week of the negotiations, "the parties decided that it is time to go the extra mile, European The negotiations will continue in Brussels. UK Prime Minister Boris Johnson meanwhile pointed out that the country would certainly not be "walking away from the talks" and that they should "continue to try" to find a deal.

According to rumors, over the weekend the UK offered the European Union some concessions on the issue of "equal playing field", which is considered one of the most important issues for the EU. "What we can't do is compromise on that fundamental nature of what Brexit is all about which is us being able to control our laws, control our fisheries," said Johnson.

If it works, the UK could reach an agreement on another major question: EU fishing rights in British waters.

If the trade agreement is not concluded by the end of the year, decades of free movement of goods, services, citizens and capital will end abruptly. British firms return to trade with the EU under rules set by the World Trade Organization in 1995. This means that imports and exports to the EU will be subject to WTO tariffs.

Notably, the meeting of the Bank of England is scheduled for December 17. Under the current circumstances and probability of a no-deal Brexit, the regulator may decide to further slash the interest rate.

What was shown on the trading chart on December 11?

Taking into account the possible hard Brexit scenario, investors dragged the pound sterling down, to the new weekly low. It fell to the level of 1.3134. The British currency has not decreased to such lows for more than three weeks.

The pound sterling was very volatile. At the start of the European session. it nosedived by 189 pips which accounted for the entire volume of daily activity.

As you can see, Friday's volatility exceeded the daily average by 59%, which is the second-highest indicator since the beginning of the trading week.

Trading activity is buoyant amid the high level of new deals and the average daily dynamics of the past week which came in at 158 pips, which has not been seen for quite a long time.

Looking at the daily chart, there is a medium-term uptrend to the level of 1.3537, which has been broken on December 4.

This week, the UK and the United States will not unveil any important economic data. Market participants are focused on the Brexit reports.

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This morning, Michel Barnier has told EU ambassadors a Brexit deal can be reached this week if the two sides find a compromise on fisheries. The negotiations could continue until December 31. "There is not much time, as we know, but with effort, I hope and I trust that we can reach an agreement," he said.

A little later, Michel Barnier told that the UK has made concessions on the rules of fair competition and in turn expected the EU to soften its stance on fishing rights.

This was the main season for a rise in the British currency.

Analyzing the current trading chart and taking into account the price gap, you can see that the pound sterling has strengthened by more than 1.66% (215 pips). As before, the market reacts to expectations, when many traders are betting on a positive outcome on the trade deal.

Now, it is recommended to closely monitor the Brexit news and base your trading strategy according to this news. In addition, high volatility is likely to persist.

Positive news on Brexit leads to the strengthening of the pound sterling

Negative news on Brexit leads to a weakening of the pound sterling

You can stay abreast of the latest news with the help of the analytics section or the media, e.g. Bloomberg, Wall Street Journal, Reuters.

Key levels for the upward trend: 1.3470 and 1.3530.

Key levels for in the upward movement: 1.3300; 1.3225; 1.3000.

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Technical analysis

Analyzing a different segment of timeframes (tf), it is clear that the indicators of technical instruments on the hourly and daily charts signal bullish momentum thanks to the rapid upward movement. Minute intervals signal the bearish bias.

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Weekly volatility: Month; Quarter; Year

The measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.

The dynamics of the pair is 155 pips, which is 30% higher than the average level. Taking into account the gap, its volatility is more than 215 pips.

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Key levels

Resistance levels: 1.3600; 1.3850; 1.4000***; 1.4350**.

Support levels: 1.3400*;1.3300**; 1.3000***; 1.2840/1.2860/1.2885; 1.2770**; 1.2620; 1.2500; 1.2350**; 1.2250; 1.2150**; 1.2000*** (1.1957).

* Periodic level

** Range level

***Physiological level

Gven Podolsky,
Analytical expert of InstaForex
© 2007-2024
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