4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -26.5121
The British pound resumed its upward movement on Wednesday, December 9, although it had previously broken the moving average line. However, we have repeatedly warned traders that the "swing" continues at this time, as well as that the pair has repeatedly overcome the moving average in the last couple of months, after which it still resumed moving north. Thus, what has happened now is only what has been happening constantly in recent months. Whether traders again believed in the agreement between the UK and the EU, or the reasons do not lie on the surface and are not available to ordinary traders. One way or another, the British pound began to rise in price again. It began to rise in price when Michel Barnier once again said that the European Union needs to prepare for Brexit without an agreement. But it is Michel Barnier who knows the whole process from the inside. Who better to know if there is a chance of a trade deal? But market participants continue to ignore the information that should put strong pressure on the British currency. In general, the whole year 2020 turned out to be absolutely illogical and completely crazy. Thus, we are not even very surprised at what is happening in the foreign exchange market. We just remind traders that no important information is being received from overseas, so the reason for the growth of the pound/dollar pair is not in the weak fundamental background from the United States.
Since there are no other important fundamental issues at the moment, we can only analyze Brexit and trade negotiations. This makes absolutely no sense, as the pair continues to trade, without taking into account the fundamental background. However, in the long run, it can still play a role. At least, with a 90% probability, we can now conclude that the pound is getting more expensive unfairly and without reason. Thus, in the future, this may lead to a new strong fall in the British pound. Meanwhile, German Chancellor Angela Merkel continues to believe that London and Brussels will be able to agree on a deal. However, now her words sound just as necessary to be said. "We still have a chance to reach an agreement. We continue to work on an agreement, but we are also ready for a "No Deal" Brexit. One thing is clear: the integrity of the EU's internal market must be preserved. We must have a level playing field, not only today but also in the future. Otherwise, there are conditions of unfair competition that we cannot subject our companies to," Merkel said. But Michel Barnier put an end to the negotiations with London: "We will never sacrifice our future for the present. Access to our market is granted only under certain conditions."
At the same time, when negotiations continue and it is not clear when they will end at all, we suggest trying to figure out what real options remain for the parties to agree on a deal? The first and most important point required for implementation is to agree. We believe that there would be no problem with this point at all if London and Brussels had more time. Thanks to Boris Johnson. But then some options can help to adopt the agreement on time without a detailed study of the multi-page agreement by all parliamentarians and instances. First, the parties can agree on an "interim and temporary" version of the agreement. Secondly, it is possible to conclude an agreement for a certain period (a couple of years) with free trade, but at the same time, it should include clauses according to which either side can restrict it if there is unfair competition on the other side. The "fish question" can generally be settled quite easily, because it is not really "expensive". The price of the issue is about 1 billion euros. This is the amount that European seafood fishermen catch every year in British waters. Third, if the agreement is achieved, the European Council and the European Parliament can ratify it without going through all the parliaments of the EU countries. This is called "temporary approval". And later, if the parliaments of all EU member states also ratify the agreement, then it will already fully enter into force. In general, the options are still available. But the likelihood of a trade agreement is still minimal. However, the parties can continue negotiations at least until December 31. Do they see a real opportunity to make a deal do they see the point in continuing the discussion?
Well, the pound continues to throw from side to side. Strange as it may seem, the upward trend remains, although this does not make it easier for market participants since it is not clear at all what factors to study to be able to predict the further movement of the pair. At the moment, the quotes are fixed above the moving average, but nothing will prevent them from going below the moving average line today. Thus, it is extremely inconvenient to trade now and it may not be the worst option to wait until the situation stabilizes. Or the final decision on trade negotiations will become known, from which it will be possible to start already.
Recently, everyone has somehow forgotten about the "coronavirus". Or they are waiting for the start of vaccination of the population. In the UK, the "second" wave has declined and at the moment 10-15 thousand new cases of the disease are recorded daily. In America, the situation is the opposite, there is no decline, and the incidence rates remain peak - about 200,000 new cases per day.
The average volatility of the GBP/USD pair is currently 144 points per day. For the pound/dollar pair, this value is "high". On Thursday, December 10, therefore, we expect movement inside the channel, limited by the levels of 1.3234 and 1.3522. The reversal of the Heiken Ashi indicator back up may signal a new round of upward movement.
Nearest support levels:
S1 – 1.3367
S2 – 1.3306
S3 – 1.3245
Nearest resistance levels:
R1 – 1.3428
R2 – 1.3489
R3 – 1.3550
Trading recommendations:
The GBP/USD pair on the 4-hour timeframe is now in a new round of downward movement. Thus, today it is recommended to stay in short positions with targets of 1.3306 and 1.3245 until the Heiken Ashi indicator turns up. It is recommended to trade the pair again for an increase with targets of 1.3489 and 1.3522 if the price is fixed back above the moving average line. In general, high-volatility "swings" are continuing now. This is not a good time to trade.
