Hourly chart of the GBP/USD pair
A round of corrective movement began last night for the GBP/USD pair. Thus, after slightly pulling back to the upside, the pair's quotes may fall again. Formally. In practice, the pound can completely freely and calmly resume its growth today, as it has done more than a dozen times in the second half of 2020. Formally, the upward trend has been canceled, as the pair's quotes have settled below the upward trend line yesterday (now marked with a dotted line). However, earlier the price also repeatedly surpassed the trend lines, afterwards it went back to moving up. In general, the situation for the pound is the same as for the euro. Whether there are certain reasons behind it or not, the British currency as a whole continues to rise in price and that's it. Moreover, if the reasons for the pound's growth can be found in the last two weeks, when London and Brussels were able to agree on a trade deal and avoid a "hard" Brexit, then before that, it was very difficult to say why the pound rose in price for several months. Moreover, the British economy has been under the threat of new falls and contractions all this time. A new strain of coronavirus was found in the UK, thanks to which the country was isolated, and Prime Minister Boris Johnson initially tightened quarantine (bad for the economy), and now intends to introduce a third lockdown. Even beginners understand that a lockdown (in principle, like any quarantine) is a blow to the economy. And Brexit itself, which, even with a deal, will still have a negative impact on the economy. Thus, even taking into account the existence of a trade deal with the EU, the pound has much more downside factors than growth factors. Nevertheless, the pound continues to rise in price in the medium term.
Nothing super interesting in the calendar of macroeconomic events for Tuesday. Perhaps, yesterday the pound fell due to news of a possible third lockdown, as before, the British currency fell on the news of a new strain of coronavirus, which began to spread rapidly among UK residents. But in the medium term, this, as we see, does not play any role. The pound continues to rise anyway. In all fairness, take note that the epidemiological situation in America is no better. It's just that in the United States, they are limited to local quarantines, which are often not tough at all. In general, almost 300,000 new cases of the disease were recorded every day in America last week. Such unfortunate news...
Possible scenarios for January 5:
1) Buy orders have lost their relevance, as the pair quotes have settled below the upward trend line today. Thus, in order to be able to consider long positions, you should wait for a new upward trend or the end of the downward trend. This scenario is not expected in the next 24 hours.
2) Selling became relevant as traders broke the upward trend line. So now you are advised to monitor a new sell signal from MACD. The indicator is still quite weakly discharged and has not even come close to the zero level. Better to wait until it runs out. Sell targets are 1.3503 and 1.3440.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners on Forex should remember that not every single trade has to 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