4-hour timeframe
Technical data:
The upper channel of linear regression: direction – up.
The lower channel of linear regression: direction – up.
The moving average (20; smoothed) – sideways.
CCI: -124.3468
The GBP/USD currency pair fell to the moving average line during the last trading day. Although Mario Draghi's speech did not concern the British pound, and most of the macroeconomic information from overseas was a failure, traders still found reasons to buy the US currency. The reasons for this are not in Thursday's macroeconomic statistics. Orders for long-term goods showed a significant reduction, the indices of business activity in the US services and manufacturing sectors Markit showed a minimal increase compared to the previous month, but, firstly, these are not the final values for October, and secondly, the more significant indices of business activity, ISM, is yet to come and it is on them that traders have always paid more attention. Well, there was no economic plan news from the UK at all. Not a single report for the entire current week has been published in the United Kingdom.
The UK remains mired in the abyss of Brexit, and there is no visible way out of this situation. According to the latest information, Brexit will be postponed, this was stated by representatives of the European Union. The website of the European Parliament published a release saying that European leaders sent a letter to the President of the European Council, Donald Tusk, in which they recommended to accept the request of the UK for a new delay. The postponement will allow the United Kingdom to clarify its position, and the European Parliament to properly perform its role – said the head of the European Parliament David Sassoli. And the main character of the whole process – Boris Johnson – somehow strangely went into the shadows in recent days. Previously, the Prime Minister handed out the interview left and right and in each one did not forget to declare that the country would leave the EU on October 31, no matter what the cost, but now there is "silence on the air".
The latest initiative of Boris Johnson in general, so to speak, does not apply to Brexit. He proposed to the opposition to hold early parliamentary elections on December 12. According to Johnson, this will help lead the country out of the impasse on Brexit. Johnson believes that the new composition of parliament will be more compliant, and also expects to increase the presence of conservatives and allies in the Lower House, which will allow him to freely implement any Brexit scenario. Most likely, the opposition understands what Johnson wants to achieve. The question is, does Jeremy Corbyn believe that he will be able to increase the presence of opposition forces in parliament, which will help him implement the scenario of a second referendum and perhaps even remove Boris Johnson from his post? Johnson proposed to vote for the election on October 28, that is, early next week. Naturally, with the sauce "I give you time to study the Brexit agreement in detail, you give me the election." Strange trading operation. Parliament may at any time block Johnson's "deal" and calmly disagree on re-election. What is Johnson's trump card? The Prime Minister is stubbornly trying to create an aura of almost a monarch around himself, but in practice, it turns out that all his actions are controlled by the Parliament, canceled through the court and openly blocked. Also, the Labor party, led by Jeremy Corbyn, stand their ground: at first, leveling the threat of the "hard" Brexit, then the elections.
Although all the countries of the European Union have already approved the postponement of Brexit, some of them are Germany and France, do not want to just mindlessly follow the request of London and want the government to explain, based on exactly what reasons it wants the transfer. That is hostility towards Brexit is already beginning to brew among the European government, since the UK itself does not know what it wants, regularly negotiates with the EU about something, then it cannot accept the agreement within its own Parliament and again asks for a postponement. French Minister for European Affairs Amelie de Montchalin said on Thursday: "France's position is to give more time if it is needed if we understand why we are doing this. There was little time for the ratification of the agreement. If they tell us: "We want to hold elections", then we will consider the issue of elections."
Thus, Brexit risks being delayed for a few more months, and if at the end of this period we were waiting for an unambiguous exit of the country from the alliance (already in any scenario), we could say: "It remains to wait only three months." However, there are no guarantees that the situation will be resolved in 3 months. There is no guarantee that elections will be held, that the Conservatives will increase their presence in Parliament. The pound, therefore, remains in limbo and, from our point of view, will again be inclined to a downward movement. At least until next Wednesday, before the Fed meeting. From a technical point of view, the pound/dollar pair has worked out the moving average, and if it rebounds from it, it will be able to resume the upward trend. From our point of view, the stock of bulls has dried up, and now only an outright negative from overseas can have a beneficial effect on the British pound. Moreover, the 800-point rise in the pound is currently meaningless. The "hard" Brexit would not seem to be implemented, but only on October 31, it can still be implemented later. Thus, we believe that traders will even try to win back these 800 points.
Nearest support levels:
S1 – 1.2817
S2 – 1.2695
S3 – 1.2573
Nearest resistance levels:
R1 – 1.2939
R2 – 1.3062
R3 – 1.3184
Trading recommendations:
The GBP/USD currency pair resumed its downward correction. Thus, traders are advised to buy the British currency again with targets of 1.2939 and 1.3062 if the pair remains above the moving average. However, we recommend doing this cautiously, as the upward trend persists, but the fundamental background is more inclined to move down. It is recommended to consider sell positions not earlier than overcoming the moving average with the nearest target of 1.2695.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustrations:
The upper channel of linear regression – the blue lines of the unidirectional movement.
The lower channel of linear regression – the purple line of the unidirectional movement.
CCI – the blue line in the regression window of the indicator.
The moving average (20; smoothed) – blue line on the price chart.
Support and resistance – red horizontal lines.
Heiken Ashi – an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
