4-hour timeframe
Amplitude of the last 5 days (high-low): 67p - 58p - 53p - 84p - 54p.
Average volatility over the past 5 days: 63p (average).
The British pound sharply increased on Monday, November 11, adding about 70 points. Running a little ahead, the pair's behavior was completely unrelated either to today's macroeconomic reports, or to elementary logic and common sense. The information that had the status of "unexpected" and "discouraging" simply entered the market. Traders did not have time to analyze it properly, but simply began to close previously opened positions. Since the pound has been declining recently, the pair's sales were closing, which led to a small, but sharp, increase. But first things first.
Macroeconomic statistics from the UK today not only turned out to be worse than forecasts, or weak, it failed completely, on all fronts. We have already repeatedly stated that the economy of Great Britain continues to deteriorate, but due to the fact that the main attention of market participants is focused on Brexit and the elections, these data are fading into the background. They leave, depart, and there they remain, because no (!!!) reaction to the publication of GDP and industrial production was followed today. Monthly GDP fell by 0.1% in September. That is, the growth rate did not slow down, namely, the volume decreased. The preliminary value for the third quarter indicates that the increase in quarterly terms will not exceed 0.3%, and in annual terms not more than 1.0%. Forecasts were above real values. Is it worth recalling that GDP is the most significant indicator of the state of the economy? Industrial production collapsed quite predictably. In the morning, we said that with those business activity indices that are now fixed in the EU countries (the UK currently remains part of the EU), there can be no question of any growth in industrial production. Thus, the collapse of 1.4% in annual terms in September is still good. Along with such disappointing statistics, the pound managed to rise in price today. What happened?
Recently, the created Brexi party, the initiator of the entire process of divorce from the European Union, Nigel Faraj officially announced that he would not nominate his candidates for elections in those areas where the Conservatives won earlier (in 2017). There are also 317 polling stations. In essence, this means that the Brexit party will work in the elections for the highest possible weaning of votes from Boris Johnson's Conservative party rivals. In fact, this means the coalition between the two parties, which Donald Trump so dreamed of, calling both Faraj and Johnson his friends. The leader of the Brexit party said that the competition of his candidates with the Conservatives could take away part of the votes from Brexit supporters and increase the chances of the Laborites, who are in favor of holding a second referendum, to win. Since Faraj himself advocates a "hard" Brexit without any agreements with the European Union, this is precisely what he motivates his actions to create an alliance with Conservatives, saying that he works for the benefit of the quickest completion of the "divorce" process with the EU. It was after the publication of this information that the pound went up. We will try to analyze whether this plan of Faraj and Johnson is able to bring additional seats to the Conservatives in the Parliament? We believe that if so, then a little. As we have repeatedly said, in the current election they will not vote for one or another program of a particular party, they will vote for Brexit options. That is, in fact, on December 12, a kind of nationwide referendum will take place, where voters will be asked to choose the Brexit option by electing one or another politician of one or another party that supports one or another Brexit scenario. Thus, everyone who is against Brexit will in any case vote for the Labour Party. And the main question is, how many more opponents of Brexit have become over the past three years? In 2016, there were 48%.
The sterling pound, which has grown on emotions, can very quickly return to a downward channel, since nothing has brought the country closer to an orderly exit from the EU. The victory of the Conservatives in the upcoming elections gained a few additional percent of probability, but no more. Thus, from a technical point of view, now short positions are no longer relevant, but the pound/dollar pair already shows a desire to bounce off the lower boundary of the Ichimoku cloud and the resistance level of 1.2890. Well, a return below the critical line will mean the resumption of a downward trend, albeit not strong.
Trading recommendations:
GBP/USD unexpectedly started an upward correction. Thus, it is recommended that traders wait for the correction to complete, the price to return below the Kijun-sen line, after which it will be possible to resume sales of the pair with the goal of the support level of 1.2716. It is recommended to buy the currency pair under current conditions no earlier than consolidating above the level of 1.2925, which is obtained based on average volatility.
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.
The material has been provided by InstaForex Company - www.instaforex.com