The dollar index continues to decline today, as well as the yield of 10-year Treasury. The market is still reacting to the position of Donald Trump, who exerts public pressure on the Fed, expressing dissatisfaction with the tightening of monetary policy. The dollar sank almost in all pairs, including paired with the pound. The British currency has its own reasons for cautious optimism: London and Brussels have announced preparations for the final stage of Brexit negotiations, outlining the timeframe. Although the key controversial issues are still not resolved, the peace-loving tone of the negotiators provided support to the British, who was able to return to the framework of the 29th figure.
Let me remind you that earlier in the market there were very contradictory rumors. According to one information, the negotiations should start from day to day, other sources claimed that the UK will be dragging out negotiations until November, hoping for the support of Donald Trump, who will attend the G20 summit. As a result, both assumptions were confirmed: now the negotiations will be conducted constantly, so to speak, in the "background" mode, and the time frame for concluding a framework agreement in November of this year, plus or minus a week. The parties recognize that London and Brussels have approached the final stage of the talks, during this round either a deal will be concluded, or Britain will withdraw from the EU without any agreements. In general, there is very little time left. It is not enough to find a common compromise, all 27 EU countries, as well as MEPs, will have to ratify the Brexit treaty.
Given the fact that the parties intend to sign a deal by the end of November, and Brexit is scheduled for March 29, the time really "is short". Therefore, by and large, negotiators have only one attempt to find a common denominator in complex issues. First of all, we are talking about the Irish border. Yesterday, at a joint press conference, representatives of the EU and Britain recognized that this issue is the most problematic, since it lies solely on the political plane. By the way, according to some experts, the problem of the Irish border is crucial for Brexit, as soon as a compromise is found here, the chances of concluding a deal will increase in many respects. Therefore, tracing the negotiation process, traders should pay attention to this aspect.
By and large, the negotiators did not say anything new yesterday. But the bulls GBP / USD found their advantages in their rhetoric. First, the parties promised to speed up the process of finding a compromise, and secondly, they voiced the time guidelines. The market is already used to the idea that at this stage of the negotiations, London and Brussels will have the last chance to agree. Now, there is a clear timeframe and the so-called deadline. It is unlikely that these factors will provide long-term support to the pound, but in the short term, the pound got a reason for corrective growth.
Further prospects for price correction will depend on the behavior of the dollar. Ahead of the Greenback a few heavy days: today will be published the protocol of the Fed, tomorrow we can learn the first results of the visit of the Chinese delegation to the US, and on Friday the market will monitor the speech of the head of the Fed in Jackson Hole. In addition, Donald Trump can again strike a verbal blow at the dollar with his rhetoric - judging by the latest speeches, he will react sharply to the tightening of monetary policy. Jerome Powell has not yet responded to the attacks of the US president, but if this week he comments on the criticism of Trump, then we can talk about the beginning of their correspondence confrontation. This fact will undoubtedly increase the pressure on the American currency.
From the technical point of view, the situation for the GBP / USD pair is not unique. On the daily chart, the price is on the midline of the Bollinger Bands indicator, which is in the extended channel. This indicates a flat "outset" without a certain vector of motion. But if the pair fixates over the Kijun-sen line (that is, above the 1.2930 mark), the indicator Ichimoku Kinko Hyo will form the signal "Golden Cross", which will indicate a break in the southern trend. Such an arrangement will increase the likelihood of an upward movement with the main target 1.3190 (the lower boundary of the Kumo cloud on the daily chart). In turn, the support level is the price of 1.2780 - this is the Tenkan-sen line.
As you can see, the general situation for the pound / dollar pair remains uncertain, both from the point of view of the "foundation" and the technical side. Only fixing the price above 1.2930 will allow us to speak with certain certainty about the priority of the northern movement.
The material has been provided by InstaForex Company - www.instaforex.com