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12.01.202117:02 Forex Analysis & Reviews: Analysis of GBP/USD on January 12, 2021. Negative rates

Exchange Rates 12.01.2021 analysis

The section of the trend, which originates on September 23, took a five-wave fully completed form. The internal wave structure of the proposed wave 5-5 does not look quite convincing and may require additions and adjustments, as well as the entire wave 5. Nevertheless, the upward trend section is almost about to end.

Exchange Rates 12.01.2021 analysis

On a smaller scale, the wave counting has also undergone certain changes and may require adjustments. Within the upward wave 5, the wave structure can be complicated as many times as necessary. At the moment, it is quite possible to resume the rise in the instrument quotes within the wave 5-5-5. At the same time, the wave counting of wave 5-5 does not look entirely convincing. A subtle point, you need to be careful.

Brexit and trade negotiations are now behind us, but the British economy and its problems have not gone away. Many analysts have repeatedly drawn attention to the fact that the British economy will shrink in the near future. And the Brexit remains the culprit, which, although it has gained the status of "soft" thanks to the deal with the EU, still will not be cloudless for the economy.

Everyone believes that the coronavirus pandemic, its third wave, and the third lockdown will continue to leave scars. Thus, the pound sterling is not in vain experiencing problems in recent days. For the pound, an upward trend segment is likely to remain, and it may become more complicated several more times before it ends. Everything will depend on what the mood of the markets will be in the coming weeks and months. It is no secret that it is the positive vision of reality in the markets that has brought the pound to where it is now. But economic reports from the UK and the US now have an extremely small impact on the movement of quotes.

Do not forget about such a significant member of the foreign exchange market as the Bank of England. Back in the first half of 2020, its representatives began to declare a possible reduction in the key rate in the negative area. During the second half of the year, Andrew Bailey repeatedly fueled this topic, but he said this based on the high probability of no deal with the EU. But the deal is still concluded, so many could already calm down about this. However, yesterday, policymaker Silvana Tenreyro said that the Bank of England's work on the validity of negative rates continues. According to her, negative rates can help return inflation to target levels faster, and the economy can recover.

General conclusions and recommendations:

The Pound-Dollar instrument can resume the construction of an upward trend section at any time. Thus, I currently recommend buying the GBP/USD in case of an unsuccessful attempt to break the 100.0% Fibonacci level with targets located around 37 and 40 figures, within the expected 5-5-5 wave of the upward trend section. But still, it should be understood that the upward section of the trend cannot be extended indefinitely. And the closer it gets to completion, the more dangerous it is to buy the pound.

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

Chin Zhao,
Analytical expert
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