Hourly chart of the GBP/USD pair
Everything is much more complicated with the GBP/USD currency pair than with the EUR/USD pair. Macroeconomic reports released in the UK this week (inflation, GDP, industrial production, wages, unemployment) can generally be regarded as weak. However, the pound sterling clearly does not show a special desire and intention to fall against the dollar. Therefore, we can now conclude that traders do not have a common trading strategy and even an answer to the question "what to do with the pound in the near future?". On the one hand, the difficult epidemiological situation in the US, which will definitely have a negative impact on the country's economy, does not make it possible for the dollar to return to growth (US dollar grows = fall of the GBP/USD pair). On the other hand, the UK still has not resolved the issue of its relations with the European Union after December 31, 2020, which is when the transition period will be completed, and Britain will officially leave the European Union. Recall that on this day, all agreements and deals between Britain and the EU will be canceled. First of all, this concerns trade agreements. There will be no free trade (without duties, quotas, or other restrictions) between the UK and the EU starting on January 1. This means that it will now be more difficult for British companies and manufacturers to export their services and goods to the EU. Just as it will be more difficult for them to interact with their European partners. All this threatens even more cuts for the British economy and, accordingly, a new fall in the British pound.
Technical analysis tells us that the pair failed to continue its growth above the 1.2665 level. Three attempts to continue the upward movement were made on July 7, 9, and 13, but all were unsuccessful. Thus, we have built a downward trend line (one of the main tools for determining the trend), which just shows that in the near future we can expect quotes to fall. The important support level of 1.2573 has been overcome once again, which allows us to expect a slight drop. There are two possible scenarios based on these technical constructions:
1) Since the pair has settled below the 1.2573 level (closing the bar below this level at the end of the hour), we advise you to sell with a goal of around 70 points down. In other words, we place the Take Profit order near the 1.2479 level.
2) If the pair closes above the trend line at the end of the next hour (we assume that this may happen near the level of 1.2658), this will be a buy signal. In this case, we recommend buying the pair, and you can consolidate the profit around the 1.2735 level manually, or by placing a Take Profit order. Both targets are positioned at a safe distance from the intended entry points.
Important speeches and reports (always contained in the news calendar) can greatly affect the movement of a currency pair. Therefore, during their exit, you are advised to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners who trade in the forex market should remember that each transaction cannot be profitable. Developing a clear strategy and money management is the key to success in trading for a long period of time.
The material has been provided by InstaForex Company - www.instaforex.com