Jean-Claude Juncker decided to cheer up the pound a bit with a statement that he sees prospects for a divorce deal between the European Union and the UK, before October 31. Such good news greatly pleased investors who were always worried about the unpredictable risks associated with the unregulated Brexit, and they immediately increased their positions in the pound. True, they tried to stop all kinds of talking heads, who in unison sang a song about the inevitability of parity with the dollar, if the saga with the divorce agreement does not burn out. However, the best singer was Olli Rehn, the head of the Bank of Finland, who was suddenly visited by an insight, which he decided to immediately share with the whole world. It turns out that as a result of unregulated Brexit, the greatest economic damage will be inflicted on the economy of the United Kingdom, not the European Union. What can I say, even Jean-Claude Juncker himself concluded his speech by remarking that he does not strongly believe in the possibility of concluding a divorce deal, but nobody cared. After all, they said that there was a possibility, albeit insignificant, that the parties could still come to an agreement.
The trouble is that the growth of the pound is due solely to emotions and faith in a brighter future, while reality is somewhat depressing. The Bank of England continues to pretend to be an ostrich, who hid his head in the sand, leaving the monetary policy parameters without any changes once again. It is clear that until this farce with Brexit is resolved, Mark Carney is afraid to take at least some steps, regardless of the real situation in the British economy. So this is not confident stability, but banal cowardice. Moreover, macroeconomic statistics showed a slowdown in retail sales growth from 3.4% to 2.7%. But inflation has also recently declined. Thus, there are no reasons for the growth of the pound.
Retail Sales Growth Rate (UK):
So let's be honest - if there are no real reasons for the growth of the pound, then as soon as emotions subside, reality will take its toll. And given that the macroeconomic calendar is completely empty today, market participants will have the opportunity to calmly think it over. These thoughts, may well lead to a gradual rebound of the pound.
The GBP / USD pair was kept in the region of the level of 1.2500 for a long time, where it felt periodic resistance in front of itself, forming as a fact a deceleration with a subsequent surge towards the formation of an oblong correction. Considering the trading chart in general terms, we see that the corrective move has not gone away and already amounts to more than 600 points from historical minimums, which is more connected with the flow of information and news background.
It is likely to assume that the upward interest still holds in the direction of the subsequent level of 1.2620 to some extent, where it is possible to expect a slowdown near it with a subsequent return to the level of 1.2500.
Concretizing all of the above into trading signals:
From the point of view of a comprehensive indicator analysis, we see that indicators at all the main time intervals signal an upward interest, thereby confirming the further formation of an oblong correction.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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