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Investors are willing to grab even for the illusory possibility of a successful resolution of the fuss with Brexit, which we witnessed yesterday. The impressive pound growth was triggered by just one statement made by Boris Johnson during a joint press conference with Emmanuel Macron. The British Prime Minister made a short tour of continental Europe, in order to discuss Brexit with the head of the largest countries of the European Union, and everywhere he had to hear about the same thing. First, Boris Johnson visited Berlin, where Angela Merkel told him that the United Kingdom has only thirty days to propose its own version of the amendments to the previously proposed version of the divorce agreement. However, Frau Chancellor added that the time is running out and London's amendments should not fundamentally differ from the provisions of the agreement, which the House of Commons has repeatedly rejected. The very next day, Boris Johnson arrived in Paris, where the less experienced Emmanuel Macron expressed roughly the same thing, but not so subtly and covertly. Thus, we can say that the President of France simply translated the words of the Federal Chancellor from diplomatic into human.He almost directly stated that there can be no changes in the provisions of the existing agreement, and we are talking about cosmetic changes that do not change the essence of the document.

Exchange Rates 23.08.2019 analysis

However, this did not affect the markets, as investors did not hear anything new. Europe continues to insist on its version of the divorce agreement, which does not suit the United Kingdom too much. At the same time, Boris Johnson's statements produced the effect of an exploding bomb, and brought some kind of revival to the measured course of events. The British Prime Minister made an unexpected statement regarding the border between Ireland and Northern Ireland, saying that under no circumstances should border and customs control be allowed between the two parts of the Emerald Isle. After all, Brexit implies not just the British withdrawal from the European Union, but also the breaking of existing trade and economic relations between London and Brussels. That is, instead of a single market, customs duties and other delights of free trade will be introduced. This is exactly what all Brexit supporters advocate, since in their opinion, the need to comply with all the rules and norms of this very single European market deprives the UK of economic independence. After all, all these notorious rules are not written in London, but in Brussels. Therefore, supporters of Brexit, which includes Boris Johnson, are in favor of a complete exit from the single European market, although there is an obstacle in their way, in the form of Ireland. The fact is that there is no border between Ireland and Northern Ireland, and this is regulated not only by the agreements of the European Union, but also by the Belfast Agreement. And if the UK leaves the European Union, then still, London will not be able to put up any customs barriers, since all the same rules of the single European market will continue to apply on the border between Ireland and Northern Ireland. In other words, Great Britain leaves the European Union, loses the opportunity to somehow influence decision-making on trade and economic issues, but continues to obey all the same rules. This is an even greater loss of economic sovereignty. Moreover, Northern Ireland turns into a transit zone overnight, which means that part of the profit that is currently distributed among the other components of the United Kingdom will settle in it. Well, this will lead to an increase in internal contradictions and conflicts. Also, the funny thing about all this is that even before being elected prime minister, Boris Johnson almost swore that he would not allow such a development of events. Now, he's talking about that first you need to leave the European Union, and then sit down at the negotiating table on trade and economic issues.

Exchange Rates 23.08.2019 analysis

In many ways, the words of Boris Johnson do not bring the UK anything good, but investors took it as at least some kind of movement from a dead point. It does not matter in which direction. Most importantly, the negotiation process continues. Moreover, he assured everyone that the allotted thirty days will be used to the full. In short, the growth of the pound was due solely to emotions, and the desire to believe in the best. Although this is the best, it is not visible on the horizon. Gradually, the realization will come that the high-profile statements of Boris Johnson, which already contradict his words, as he spoke before being appointed to the post of Prime Minister. in general, they promise only new difficulties for Great Britain.

Exchange Rates 23.08.2019 analysis

The GBP / USD pair surprised everyone with its local jump up, against the background of the information flow about which was written above. However, something has changed. In view of this movement, there is no way at all, as we were in a rapid downward trend. The movement towards the local maximum on July 31 (1.2250) broke through our long-playing channel 1.2000 / 1.2200, but I'm not sure if the quotation will be able to gain a foothold and continue to grow as fast.

It is likely to assume that the recovery of quotation will not take long to wait, and now, the market participants are already considering returning prices to the area of the previous fluctuation. The primary coordinates that we consider are 1.2200 -> 1.2150.

Specifying all of the above into trading signals:

  • Long positions will be considered only in the case of price fixing higher than 1.2260 (not a puncture), with dense support of the information background.
  • Short positions are now being considered in the direction of 1.2200-1.2150. We will analyze the deeper decline after fixing the price lower than 1.2150.

From the point of view of a comprehensive indicator analysis, we see that the indicators on the minute periods have already changed to a downward direction. On the other hand, intraday and medium-term segments of time are variably prone to increase, precisely due to the recent surge in prices.

Exchange Rates 23.08.2019 analysis

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Performed by Dean Leo,
Analytical expert
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