1-hour chart for GBP/USD
On Thursday and Friday, GBP/USD resumed a downward move that enabled the price to form a downward broad channel and a downward trendline. Thus, the bearish trend is clearly outlined. This fact will be very helpful when analyzing a dynamic of GBP/USD and trading this downward move. At the moment, the currency pair rebounded from the lower border of the channel and resumed its move towards the trendline. So, a bounce from the trendline could reinforce a further downward move. By that time, the MACD indicator could nearly exhaust its sell signals that would allow us to expect a strong buy signal. At the same time, the buyers might receive a greenlight if the downward trendline is surpassed. The ongoing downward channel allows the pair to move towards the upper border 160 pips upwards. In other words, both the sellers and buyers could receive their signals on Monday.
The pound sterling is still sensitive to developments in the trade talks on a post-Brexit trade deal. Remarkably, today on Sunday there is still no information from Brexit negotiators Michel Barnier and David Frost. It is unclear whether they will again announce gridlock and continue the talks until any successful outcome or eventually announce a complete failure and terminate the talks. Either scenario will be bearish for the pound sterling. Personally, I reckon there is a slim chance for a trade deal between the UK and the EU. Any news on the Brexit front assures me of my viewpoint. On Friday, no macroeconomic event meaningful for the sterling took place. Earlier, UK Prime Minister Boris Johnson has already sent a message for the Britons to get ready for a hard Brexit.
On Monday, the economic calendar contains no economic data from the US and the EU. So, Monday is going to be a boring day. Nevertheless, official information on the Brexit talks could be reported by the negotiators. Anyway, beginners will be able to catch some trading opportunities. On Monday, GBP/USD could start an upward correction and even overcome the trendline. However, I foresee GBP weakness in the long term. The reason behind this prediction is that the British economy will suffer greatly without a trade deal with the EU. Everyone is aware of such gloomy prospects. The British Premier seems to be the only one who still insists that there is nothing wrong with hard Brexit.
The following scenarios are possible on December 14:
1) The chart reveals a new short-term bearish move with a clear-cut trendline and downward channel. Therefore, you would rather refrain from buying GBP/USD. Traders should wait at least until the price fixes above the trendline. Only then, the door will be open for long deals with targets at 1.3317 and 1.3388. This scenario is highly likely on Monday.
2) From my viewpoint, selling is more reasonable at present because there are a trendline and channel supporting a downtrend. Thus, a bounce from the trendline, especially with a sell signal by the MACD, could be used to open sell orders with downward targets at 1.3151 and 1.3056.
What's on the chart:
Support and Resistance levels are the levels that are targets when opening buy or sell orders. Take Profit levels can be placed near them.
Red lines are channels or trend lines that display the current trend and show which direction it is preferable to trade now.
Up / down arrows show whether the pair should be traded up or down when reaching or overcoming particular obstacles.
MACD indicator (10,20,3) - a histogram and a signal line. When they are crossed, this signals a market entry. It is recommended for use in combination with trend lines (channels, trend lines).
Important speeches and reports in the economic calendar can greatly influence the movement of the currency pair. Therefore, during their release, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners in the forex market should remember that every trade cannot be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
The material has been provided by InstaForex Company - www.instaforex.com