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09.09.2020 02:18 PM
GBP / USD analysis 09/09/2020: UK may provoke conflict with European Union which will have serious consequences

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The wave structure of the uptrend section again took on a complete form. Wave Z looks quite complete so the entire upward section of the trend is completed. The tool in this case has moved to building a new downward section of the trend with the first goals located around 25 and 27 figures. However, the Brits will really depend on the news background. In recent months, solely due to the negative news background from the US, the US dollar has significantly decreased in pair with the pound. Now, it seems, the reverse process has begun since the news that is coming at this time from the UK is quite disappointing and leaves the markets with no other options than to sell off the British.

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If we look at the current wave pattern in more detail, we see that the entire upward section of the trend is completed and the quotes of the instrument have rushed down. Thus, at this time, the construction of a new downward section of the trend and its wave 1 or A is presumably continuing.The strength and length of this wave will depend entirely on the news background which is why such a strong decline in the British quotes began.

The news background from the UK continues to be absolutely negative. In previous reviews, I wrote that negotiations between the EU and Britain are almost 100% likely to end in a final failure. The two sides have not met each other halfway for a long time and each subsequent stage becomes a mere formality. Both sides simply declare that there is no progress with the results. It seems that even Boris Johnson is tired of this farce and has set a deadline for the end of negotiations – October 15. However, this information has already been more than worked out by the markets. The British pound has already lost about 550 points. Now the market has received new information that the UK Parliament may amend the bill that defines many legal aspects of Northern Ireland which, after Brexit, will become a "window to Europe" for Britain. London may change the customs regime on the border with the Republic of Ireland which is unlikely to please the European Union. It turns out that London will unilaterally change some of the provisions of the existing agreements. This further reduces the chances of success in the negotiations and makes a very real conflict between Brussels and London which may start in 2021 when the border between Ireland and Northern problems begin. It is too early to judge what measures Brussels may take in response to London's misconduct but we can be sure that they will follow. Some economists even talk about a trade war between Britain and the EU

General conclusions and recommendations:

The Pound-Dollar instrument has presumably completed the construction of an upward wave Z. Thus, I would recommend now to sell the instrument with targets located near the 1.2867 and 1.2720 marks which corresponds to 50.0% and 61.8% Fibonacci.

Chin Zhao,
Analytical expert of InstaForex
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