4-hour timeframe
Amplitude of the last 5 days (high-low): 78p - 88p - 150p - 78p - 66p.
Average volatility over the past 5 days: 92p (high).
At first glance, GDP in the UK showed a positive trend in the second quarter of 2019, as the annual rate was +1.3% with a forecast value of +1.2% and the same value in the first quarter. However, a quarterly decrease was recorded by 0.2%. Thus, in comparison with the first quarter of 2019, we have precisely a decline in GDP. Accordingly, this is a bearish factor for the pound/dollar pair. However, traders refrained from new sales of the currency pair today. Throughout the day there was a slight upward correction, which is purely technical in nature. No important macroeconomic information has come from the United States today.
Meanwhile, Boris Johnson apologized to Queen Elizabeth II, who approved his request to suspend Parliament. In fact, this is an absolutely unprecedented case when the Supreme Court repeals the decision of the Queen of Great Britain. However, a lot of unprecedented things are happening in the United Kingdom, and how much more can happen ... Let's start with the fact that Boris Johnson can still become the prime minister who will rule the country at the shortest time. Since his assumption of office, a little more than 2 months have passed, and all these two months, Johnson "walks along the edge of a knife." He completely ruined relations with Parliament, and negotiations with the European Union are at an impasse. Now on the agenda are questions of a vote of no confidence in Johnson, or even impeachment. The prime minister himself sees this as an opportunity to hold early parliamentary elections, in which he hopes to win, which will allow him to form the necessary majority in order to adopt a hard Brexit. But we believe that the deputies also understand this very well and will not initiate procedures that will threaten the holding of early elections.
At the same time, impeachment is not a vote of no confidence. It is impeachment, which can be imposed on the basis of a Court order on the illegality of Johnson's decision to suspend the work of Parliament, that will lead to a judicial investigation against the prime minister, and in this case, the main opposition Jeremy Corbin may take his place. We believe that today or tomorrow this issue will be raised in the Parliament, and then everything will depend on how many deputies will support the beginning of this procedure. Given Johnson's sharp dissatisfaction with the work outside his own party, one can expect that all but conservatives will vote "for" impeachment.
A new dilemma arises for the pound. Is Boris Johnson's resignation good or bad for the UK and the pound? From our point of view - good. Currency traders understand that under Boris Johnson there is no agreement with the European Union, Brexit will be implemented according to a hard scenario, and severe shocks await the country's economy. Thus, his resignation and the coming to power of a more loyal leader will significantly reduce the likelihood of a hard Brexit, which is what the pound needs to get back to growth against the US dollar.
The technical picture of the pair is now showing an upward correction while maintaining a downward trend. We are waiting for the completion of a round of corrective movement and news from Parliament.
Trading recommendations:
The pound/dollar currency pair has now begun to adjust. Thus, we recommend waiting for the correction to complete, after which we again consider the sale of the pound with targets near the levels of 1.2228 and 1.2203. Buying is not recommended yet.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
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 indicator window.
