4-hour timeframe
Amplitude of the last 5 days (high-low): 106p - 111p - 118p - 89p - 111p.
Average volatility over the past 5 days: 107p (high).
The British pound on Friday, January 10, was trading with low (for itself) volatility. It was traded as if there were no macroeconomic publications in the United States, there were no NonFarm Payrolls or data on wages. And although we believe that statistics from across the ocean are completely not a failure, we were counting on some kind of reaction from traders. Everything is logical and reasonable in the EUR/USD pair. The US dollar plummeted, but not too much, which is fully consistent with the nature of the news. There was absolutely no reaction to Friday's news in the GBP/USD pair. Quotes of the pair in the framework of a new weak downward trend were first corrected to the Senkou Span B line, and then rebounded from it and resumed downward movement. Thus, we continue to believe that the British currency has only one path - down. At the same time, we also note the clearly weak desire of the bears to actively sell the pair now. It seems that the markets are waiting for something, perhaps a new, strong fundamental impulse.
All macroeconomic statistics on Friday were ignored by traders of the pound/dollar pair. Thus, it is not surprising that the topics with the transfer of the Trump impeachment case to the Senate, with the introduction of a new list of Washington's sanctions against Iran, as well as the willingness of China and the United States to sign the first phase of the agreement at the beginning of next week, also did not affect the pair's movement. In such a situation, firstly, you need to wait for that momentum, and secondly, since there is still a downward trend, you can reject this downward movement, just remember that the bears do not have a big desire to actively sell the pound.
As for the prospects of the British pound, they remain the same from our point of view. A large-scale economic study was conducted, within the framework of which it turned out that the UK economy has already lost about 3% of GDP over the years of Brexit or $170 billion. We emphasize that in three years when Great Britain remained in the EU, but wanted to leave it, the country's economy lost $170 billion. What will happen when Brexit officially enters the second phase, that is, the transition period begins? What will happen when the transition period is completed? What happens if Brussels and London fail to reach a trade agreement for 2020? So far, all these questions suggest the worst answer options for the British currency and the UK economy as a whole. Mark Carney, the head of the Bank of England, who is resigning after a month, did not become secretive in his last weeks and bluntly stated that the key rate could be lowered, the asset repurchase program expanded, and the instruments held by the regulator was not enough to stabilize the situation. We repeat: Great Britain has not even entered the transition period, and its economy is already "bursting at the seams". Thus, we believe that there are no positive expectations for 2020 regarding the pound sterling. At the very least, such a conclusion can be drawn at the moment. Of course, surprises are possible, but at the moment it's hard to even imagine what could support the British currency in 2020. Thus, we believe that the pound will be prone to fall throughout the year and may well update its multi-year lows. The period of "rising from its knees" for Britain has not even begun. By the way, official forecasts of the same economic study say that the UK economy will lose another 70 billion pounds in 2020, and the total loss over four years will amount to 261 billion dollars.
Well, to all this, it is imperative to add all the geopolitical problems that London will definitely face and which it may face potentially. For example, London's biggest problem now is Scotland, which has seriously set out to hold a second independence referendum in order to avoid leaving the European Union or to return there as quickly as possible. Nicola Sturgeon does not want her country to live according to "the principles of Boris Johnson" and will require official permission from London for a referendum. However, according to some analysts, if Johnson does not grant such a right to Edinburgh, Sturgeon can go for an open riot and hold a referendum without the consent of London. Potentially, this means a new geopolitical conflict and new losses for the United Kingdom, which at such a pace could very soon turn into England.
The technical picture now implies the resumption of the downward movement with targets 1.2993 and 1.2955. The goals are approximate and will be specified at the beginning of next week. Most importantly, the pound/dollar pair did not manage to overcome the Senkou Span B and Kijun-sen lines, so the downward movement now has no obstacles in its path.
Trading recommendations:
GBP/USD may resume downward movement. Therefore, traders are advised to continue to trade lower while aiming for the support level of 1.2993. It is recommended that purchases of British currency be returned no earlier than the price consolidation above the Kijun-sen line with the first targets of 1.3169 and 1.3224.
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 indicators 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