Hourly chart of the GBP/USD pair
The GBP/USD pair traded quite actively on Thursday. It passed around 130 points during the day. Not as much as in previous days, but still a lot. It continued to rise for most of the day, and there was a downward reversal at lunchtime and the pound began to fall. It started to fall exactly when London and Brussels signed a trade agreement and this was announced by British Prime Minister Boris Johnson and Head of European Commission Ursula von der Leyen. The following picture was obtained: the markets were buying the pound in anticipation of the agreement for several months now, but when both parties finally reached a deal, they began to sell the pound. A paradox, but quite a logical paradox. We have already mentioned in the past that the pound can fall for a long time amid the end of the epic of trade negotiations. Since the markets have been buying the pound for several months in the hope of a trade deal between the EU and the UK, now is the time to close open deals with a profit. Accordingly, there are fewer long positions, the demand for the pound does not change, but supply grows. What happens in the end? A rollback begins. Retreating can develop into a full-fledged downward trend. If the pair's quotes manage to overcome the upward trend line, this will be the second serious signal for a long-term fall in the pound/dollar pair.
The entire fundamental background of the day was reduced to the topic of the Brexit trade talks. However, now that they seem to be completed, this does not mean that there are no more problems left. The pound, as we have already mentioned above, may start to fall, and the EU and the UK have yet to make this deal through their own parliaments. Moreover, if the British Parliament is likely to unquestioningly approve the deal, since the majority of seats in it are occupied by conservative deputies (members of Boris Johnson's party), then the European Parliament will need to take into account the interests of 27 countries. However, in any case, the deal is likely to be approved and ratified. Perhaps with a postponement, perhaps "retroactively", perhaps the European Council will take its opportunity to temporarily sign any international agreement before it is ratified by Parliament.
Possible scenarios:
1) Buy orders are now relevant, since a new upward trend has formed. So novice traders can wait for a new buy signal, albeit on December 28. As before, the MACD indicator needs to be discharged to the zero level or the price rebounds off the trend line. Targets for long deals are resistance levels 1.3690 and 1.3811, which are located well above the current highs of the pair.
2) It is impractical to sell right now, since the downward trend has been canceled and a new one has not yet formed. So you need to wait for the quotes to settle below the upward trend line and only after that should you sell the pair while aiming for support levels of 1.3471 and 1.3373.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners on Forex should remember that not every single trade has to 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