4-hour timeframe
Amplitude of the last 5 days (high-low): 221p - 241p - 142p - 138p - 139p.
Average volatility over the past 5 days: 176p (high).
The GBP/USD currency pair stood in one place for most of the trading day. Traders were clearly not in a hurry to rush into battle and preferred to sit on the fence while no macroeconomic information came from either the United States or Great Britain. Indeed, why take the risk if the market receives only data regarding the failures of the current UK government on the Brexit front. Most market participants realized that the probability of a country leaving the EU under any scenario on October 31 is no more than 1%. The fact that Boris Johnson's "hard" scenario was offset and disarmed by the British Parliament was more than taken into account by investors (a pound sterling increase of over 800 points). New reasons are currently needed to further strengthen the British currency. But there are none yet. Thus, the volatility in the last three trading days has significantly decreased (142, 138 and 139 points, respectively), although overall it remains quite high. Traders began to take profits on long positions, realizing that it would be extremely difficult to get new upward factors. An overbought British currency, which has risen in price by almost 10 cents in seven days, is taken into account.
Today, September 23, the leader of the Conservative Party, as well as British Prime Minister Boris Johnson, took a step that was quite bold for himself. He met with the leader of the Labour Party and, at the same time, the whole Opposition, Jeremy Corbyn, and tried to agree on a deal with the European Union. Recall that the Parliament, with a minimum margin of vote, decided not to consider Johnson's proposal to leave the European Union at an ultrafast pace. The essence of the bill is set out on more than 200 pages, so deputies have the full right to consider such a document for several weeks. Johnson suggested, within the framework of the force majeure situation, in order to be in time before October 31, to make a decision on the document in three days and the opposition deputies gladly rejected this proposal.
However, according to unofficial information, Corbyn and Johnson did not try to come to an agreement. The prime minister wanted to find out from the Labour leader what his party's actions would be if the European Union refused to delay Brexit? Corbyn replied that his party favored a "reasonable" timetable for studying the document submitted by Johnson, amending it, and also said that the Labour Party would support the holding of early elections as soon as Brussels officially announced its agreement to postpone Brexit. However, Boris Johnson did not seem to believe his main opponent and even tried to convict him of lies and hypocrisy, saying that "he does not believe that Corbyn, who voted against the Johnson bill, will want to accept it after a detailed study." Johnson also stated that "Corbyn's goal is to abolish Brexit through a second referendum." Well, the leader of the Labour Party did not deny this, but, on the contrary, stated this repeatedly during the reign of Johnson.
Meanwhile, the patience of European Commission President Jean-Claude Juncker, who will soon leave his post, seems to be over. In a very emotional manner, he criticized the entire negotiation process with Britain, which lasted a total of more than three years. And after these three years, "things are still there." "It was a waste of time," said Jean-Claude Juncker during a press conference in Strasbourg, France. Junker also once again stated that the blame for any Brexit delays and the fact that it has not yet been agreed and ratified by the British Parliament lies entirely with London. "We can look in the mirror and be sure that we have done everything to realize the orderly exit of the United Kingdom from the European Union," Juncker emphasized. The head of the European Commission also said that the hard Brexit was never the goal of the European Union, and that it has always tried to avoid such an option of divorce, which doesn't scare Boris Johnson, but scares the British MPs. The President of the European Council, Donald Tusk, confirmed Juncker's words, and also announced that he would advise the leaders of the 27 EU member states to postpone Brexit to a later date. "Since Prime Minister Boris Johnson decided to suspend the process of ratification of the agreement with the EU, in order to avoid withdrawal without a deal. I will recommend approving the request of the UK to postpone the deadline for the withdrawal," Tusk said.
From a technical point of view, we believe that a new drop in the pound is more promising. Too strong and sharp, and even unexpected, was the rise of the British currency. Within this short-term trend, there was not even a more or less tangible correction. Thus, we believe that the downward movement will continue. The technical necessity of the pullback and the general fundamental background, which cease to support the pound, also speak in favor of this option. Since technical factors are better used as fundamental confirmation, short positions can be considered below the Kijun-sen critical line (price value - 1.2880). The only thing we would like to note is the fact that to a greater extent the Kijun-sen line "came to" the price, and not vice versa. Therefore, it is better to start considering shorts below the pivot level of 1.2827. Well, in case of a return above the critical line, we will expect the upward trend to resume, but at such high price values we do not recommend opening large buy deals.
24 hour timeframe
On the higher timeframe (daily), we see the pound/dollar pair consolidating below the resistance level of 1.2901, however, given the ease of overcoming it, when the price went up, it cannot be called strong. The Kijun-sen line is far away, and a technical correction is evident on the 24-hour timeframe. Unfortunately, tomorrow, for the fourth day in a row, there will not be a single macroeconomic report from the UK, so traders will have to react only to preliminary values of business activity indexes in the US and also wait for new messages from the British Parliament.
Trading recommendations:
The GBP/USD pair within the downward correction has consolidated below the critical line. Thus, formally, we can now consider selling the pound with the target of 1.2694. But we recommend to wait until the level of 1.2827 is overcome to open sell positions. It is recommended to return to buying if the pair is secured above the Kijun-sen line, but also in small lots, since the foundation does not assume strong growth of the pair, and the technique stands for a downward correction.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicator window.
Support / Resistance Classic Levels:
Red and gray dotted lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movement options:
Red and green arrows.
