4-hour timeframe
Amplitude of the last 5 days (high-low): 58p - 53p - 84p - 54p - 112p.
Average volatility over the past 5 days: 72p (average).
The British pound expectedly could not continue the upward movement on Tuesday, November 12, which began yesterday due to information about a certain friendly attitude of the Nigel Faraj party to the Conservatives, in which the Brexit party will not be elected in those areas in which in 2017 Conservatives won. We believe that this information is from the category of that after which the pound rose by 800 points. That is, in fact, meaningless, bordering on the concept of rumors (after all, no one knows whether Faraj will change his mind before the election), however, it provokes the British currency's growth, since there are simply no more reasons for traders to buy the pound. Yesterday, market participants simply ignored the most important macroeconomic statistics from the UK, after which the pound was supposed to tumble. Today, data from Great Britain was no better. The average hourly wage including bonuses increased by 3.6%, without bonuses - also by 3.6%. Forecasts predicted an increase of 3.8% of each indicator. It turns out that both indicators turned out to be worse than expectations of traders. The unemployment rate, which unexpectedly dropped to 3.8%, could lend a helping hand to the British pound, but the number of applications for unemployment benefits amounted to 33 thousand, instead of the projected 21. Thus, in general, the macroeconomic information package can again be called a failure. The pound did not resume falling again. Traders again ignored economic statistics.
In the meantime, German Chancellor Angela Merkel said she considers the chances of approval of the deal by the British Parliament as ultimately high. "I believe that this agreement has a high chance of getting approval in the UK. That would be good for us all, "said Merkel. The German Chancellor also said that "a serious threat to the world economy is the trade conflict between the US and China, as well as the British exit from the EU." It is difficult to agree with the first thesis of the German Chancellor, but easily with the second thesis. We consider it very reckless to talk about the chances of Parliament approving the deal on Brexit before the composition of the Parliament is generally assembled. There is exactly a month before the election, no one can predict the results, the agreement of the Brexit and Conservative parties does not mean anything. Thus, Angela Merkel simply makes another statement in order to calm the markets and residents of the European Union. We completely agree with Merkel's second thesis, since the worst time periods for the economies and the European Union, as well as the US fell precisely during the period of the trade war between China and the United States. Well, it doesn't even make sense to talk about Brexit again. The fact that it harms the economies of the EU and the UK as well as the future is already clear.
However, despite the stubborn reluctance of traders to sell the pound, it is not clear what is based on, we still believe that the pound/dollar pair's downward movement will resume. Of course, we without fail recommend that you wait for technical signals and only after that resume trading down, but from a fundamental point of view, factors that can support the British currency are still difficult to trace. We would also like to remind you that each time during the last three years, when the British pound grew on unconfirmed information, there followed an equally strong drop in the British currency. Most likely, this will be the case this time too, it remains only to wait for the moment when the patience of the bulls will burst and they will stop resisting, and the bears will finish "eating twix" and return to the market. From a technical point of view, the pound/dollar pair remains above the critical line, therefore, although the downward trend continues, short positions are not relevant now. At the same time, the Bollinger Bands even turned up, which signals a possible beginning of a flat. Given that the volatility of the pair remains low, then flat is also very likely.
Trading recommendations:
GBP/USD continues a weak 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 targets at support levels of 1.2777 and 1.2716. It is recommended to buy the currency pair under current conditions no earlier than when you consolidate above the level of 1.2910, which is obtained based on the average volatility over the past five days.
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