Hourly chart of the GBP/USD pair
A new round of downward movement began for the GBP/USD pair on January 15. Earlier (this can be seen in the chart) the pair's quotes settled above the descending channel, and so the trend changed to an upward one. Thus, bull trading should have been considered (since the upward trend was not cancelled). But on Friday, the quotes of the pound/dollar pair were only falling, so no buy signal was generated during the day. Perhaps it is for the best, since the pound's current movements are very strange, although this may not seem so at first glance. In other articles, we call this movement "high volatility swing", which indicates quite strong movements of the pair, both up and down without a clear trend. But this is not a flat, as the upward trend still persists in the long term, and the pair regularly renews its 2.5-year highs. As a result, last Friday we got a situation where the pair seemed to start a new downward movement, but at the same time there was not a single signal of a trend change. The situation will remain the same on Monday. The price can continue the "swing" mode, which is to move erratically, and it is very difficult to work out. It is very difficult to understand how the trend is now, at least in the short term.
Fundamentally, nothing changes for the British pound. And most importantly, the foundation does not clarify the technical picture at all, or make it more understandable. The UK released data on GDP for November, which showed less contraction than expected, but it's still a contraction. In theory, this value could support the pound, but traders once again showed their disinterest in important macroeconomic statistics. A report on industrial production was also published on this day, which, on the contrary, decreased in volume, contrary to forecasts. But, of course, this report had a lower priority and, moreover, was not processed.
Nothing interesting in either the UK or America on Monday, January 18. In the US, Trump is spending his last days in the White House, and in the UK, they are increasingly concerned about the epidemic, the third lockdown, and the "British" and "Brazilian" strains of the coronavirus. Thus, we are not expecting news and macroeconomic data on this day. Although it still doesn't matter, as the pound/dollar pair continues to trade according to its own rules.
Possible scenarios for January 18:
1) Buy orders are formally relevant at the moment, since the pair's quotes have previously left the descending channel. Nevertheless, it is highly likely that a new round of downward movement has begun in the long term (after the third unsuccessful attempt to overcome the 1.3700 level). Thus, the pair may move downward in the coming days.
2) Sell positions have lost their relevance. And although we are now expecting some quotes to drop even further, there are no technical signals. Therefore, you need to wait one or two days for a clear trend to form and trade based on that trend, and not at random. We recommend that novice traders wait a little outside the market.
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