Hourly chart of the GBP/USD pair
The situation with the GBP/USD pair did not clear up for a long time. The descending trend line made it possible to consider selling the pound/dollar pair. However, the price already consolidated above it on the first trading day of the week. This means that sellers turned out to be weak, so now the British currency can start growing again. However, it is not so simple. In the analysis of the EUR/USD pair, we said that the markets now clearly do not know exactly in which direction to trade the euro. Roughly the same is observed now for the pound sterling. When there is no pronounced movement in one direction, and all segments of growth and decline in size and length are approximately the same, this indicates that an equilibrium has been formed in the market between supply and demand. In other words, the number of buyers and sellers of the pound is now equal, so the pair cannot form a new upward trend or a new downward trend. The COVID-2019 pandemic in the United States continues to speak against the US dollar, where individual states, cities and counties are beginning to quarantine again. Of course, the economy will start to slow down again and it will be difficult for the dollar to show growth in such conditions. But it will be difficult for the pound to continue increasing, as the key topic Brexit remains in limbo. You should keep in mind the UK's exit from the EU, which has been the key topic for traders in recent years. It is thanks to the contraction of the British economy against the background of Brexit and even more unhappy prospects that the pound has fallen against the US dollar in recent years. The news calendar for Tuesday, July 21 does not include UK and EU events. Thus, traders will not be able to react to news on that day.
Technical analysis now makes it possible for the pound to continue growing. But since the price has reached the level of 1.2664, from which it previously rebounded, which is clearly visible in the illustration, this time it is possible to rebound and move down. Thus, we advise novice traders to carefully monitor this level and the price behavior around it. Based on the technical constructions there are two possible scenarios:
1) Since the trend line has been overcome, and the level of 1.2664, which was presented as the first goal, has been reached, we now recommend waiting for the closing above this level. In this case, novice traders can try to work out the intermediate target of 1.2734 on July 21, which is obtained based on volatility calculations (the average daily distance of the pair's movement). In other words, we place the Take Profit order just below the 1.2434 level.
2) But sales, from our point of view, are risky to consider now. There could be an attempt to get a signal over a rebound from the 1.2664 level, which will formally allow you to open sales, but we do not advise trying to work with a round of correction. Although this does not mean that the pair can not fall on this signal to the area of the 1.2515 level.
Important speeches and reports (always contained in the news calendar) can greatly affect the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners in the forex market should remember that every trade cannot be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
The material has been provided by InstaForex Company - www.instaforex.com