24-hour timeframe
Exactly 1 month ago, we wrote that for the pound, any option other than a "hard" Brexit is positive. We did not expect such a strong growth of the British currency and still believe that it was not fully justified by macroeconomic data and events.
To begin with, macroeconomic reports in the UK continue to be frustrating, and it can't be otherwise since the country is on the verge of – it is not even clear what kind of Brexit. And is it on the verge of a "divorce" from the European Union? Yes, that is precisely the question that is being posted on October 31, when Britain was supposed to officially withdraw from the EU, which Boris Johnson promised in any case. Brexit did not happen, re-elections to the Parliament were appointed, but they were scheduled for December, which means that in November traders will receive very little information regarding Brexit since all political parties will be engaged in campaigning. Well, if the Laborites win the election, which cannot be ruled out either, then Jeremy Corbin promises to hold a second referendum to provide the British people with the opportunity to speak out again for and against Brexit. Thus, three years after the decision to leave the EU, Brexit can be canceled and postponed indefinitely (since the two members of the Parliament have not been able to come to a common denominator and agree on an agreement with the European Union).
Well, let's end with the fact that, from our point of view, for the pound, postponing Brexit or reducing the chances of a "hard" Brexit is positive news, but for the UK as a whole, it's not a solution to the problem, but simply its next transfer. The country has been in limbo for three years. Companies, businesses, ordinary workers and residents panic, do not know what to expect, prepare for the worst. And the worst thing is that no one still knows whether to leave the EU Kingdom at all or "hang up". After all, if it comes to a second referendum, the advantage of those who voted for the exit (4%) in 2016 can be easily leveled out at the expense of voters who are simply tired of being in limbo and who want clarity and stability. And there are many. It's not even about the conservatives or labor or the other parties. Voters will choose the deputies of certain parties not by their views on the development of the country, but by the views of the deputies themselves regarding Brexit.
Now let's ask ourselves a question: on what basis can the British currency continue to grow if the growth it showed in October was based solely on the expectations of the signing of a "deal" with the European Union (which is currently completely useless) and the transfer of Brexit? In November, Brexit will not be rescheduled again, Parliament will not ratify Johnson's "deal", Johnson will not resign. The macroeconomic performance of the UK is unlikely to begin to improve out of the blue. Thus, we believe that the downward trend will resume, but, of course, to work out this option, you need to wait for technical signals and confirmation of this hypothesis.
Trading recommendations:
On the 24-hour timeframe, the pound/dollar pair maintains an upward trend, but the MACD indicator has turned down and so far indicates a possible resumption of the downward correction, which, from our point of view, is justified by the fundamental background. Thus, new purchases are associated with increased risks, and it is recommended to return to sales not earlier than the pair's decline to the area below 1.2800.
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 – red line.
Kijun-Sen – blue line.
Senkou Span A – light brown dotted line.
Senkou Span B – light purple dotted line.
Chinkou Span – green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD:
The red line and the histogram with white bars in the indicators' window.
