4-hour timeframe

Technical data:

The upper channel of linear regression: direction – down.

The lower channel of linear regression: direction – up.

The moving average (20; smoothed) – up.

CCI: 1.6429

The previous trading week ended with a correction for the GBP/USD pair, however, the quotes remained above the moving average line, so the upward trend continues. As we have repeatedly noted, the pound in the "times of Brexit" very often becomes more expensive solely on rumors and expectations, which later are not confirmed. Thus, the main question is: will traders experience a new disappointment in this regard? The "hard" Brexit already seems to be looming on the horizon, however, the official transfer to at least January 31 has not yet taken place. The EU and the UK continue to throw angry speeches at each other, trying to shift the blame for a possible "hard divorce" on the opponent. But progress in the negotiations, as possibly constructive in these negotiations, were not and never were. At the weekend, European Commission President Jean-Claude Juncker said that in the event of a "hard" Brexit, a hard border would appear between Northern Ireland and Ireland to "ensure the preservation of the interests of the European Union and the internal market." Thus, Boris Johnson and his government may not set the border, customs, and checks on the island of Ireland. But this will be done by the European side. Thus, from our point of view, Brussels once again makes it clear to London that the "hard" Brexit is the worst option of all and will not solve the main problem of the UK – preventing the appearance of the border on the island of Ireland. Juncker notes that without a hard border, any "animal" (probably any product or item) from Northern Ireland can get into Ireland freely, and then be in any other EU country. Well, this is true, and in principle, the essence of the "divorce" of the EU and Britain suggests that now there will be no free circulation of goods. Therefore, the problem still lies in British lands, but it is the UK that cannot solve it, fearing unrest and conflict on the island of Ireland, where the passions subsided only in 1998.

Thus, the threat of "hard" Brexit continues to "hang" over the United Kingdom, the British Parliament remains on vacation, and surprisingly, But before the EU summit, about 3 weeks remain, and it is at this summit that Johnson must either sign an agreement with Brussels or ask for the transfer of Brexit to three months. What will happen next, no one knows. Britain is now in the deepest political crisis, which is unknown how to end. Re-elections to Parliament, a second referendum, a change of government, all these options are possible. And in the case of realization of any of them, it will be even more difficult to predict the further development of events. This is what may force traders to return to the British currency sales soon: the flow of positive news from the Foggy Albion has dried up. And bears can "recall" the failed reports on inflation and retail sales that were cheerfully ignored last week.

The technical picture implies the resumption of the upward movement, as now there is a correction. However, if the bears overcome the moving average, the downward mood will return to the currency market.

Nearest support levels:

S1 – 1.2451

S2 – 1.2390

S3 – 1.2329

Nearest resistance levels:

R1 – 1.2512

R2 – 1.2573

R3 – 1.2634

Trading recommendations:

The GBP/USD pair began to adjust. Thus, traders are advised to wait for the completion of the correction and resume buying with a target of 1.2573, which has already been worked out. It is recommended to sell the pound not before fixing the pair below the moving average.

In addition to the technical picture, fundamental data and the time of their release should also be taken into account.

Explanation of illustrations:

The upper linear regression channel – the blue line of the unidirectional movement.

The lower linear regression channel – the purple line of the unidirectional movement.

CCI – the blue line in the indicator regression window.

The moving average (20; smoothed) – the blue line on the price chart.

Support and resistance – red horizontal lines.

Heiken Ashi – an indicator that colors bars in blue or purple.