The GBP/USD pair attempted to storm the 37th figure today, however, the assault ended as soon as it started. The quote failed to consolidate above 1.3700, and instead returned to the level it reached in the afternoon.
As a result, the outlook for the pound turned gloomy, but the general upward trend remains. This is because the observed decline is just a correction, and it can be used as an excuse to open long positions at a better price. To add to that, Scotland will have its parliamentary elections soon, on May 6 in particular.
In the last elections, the Scottish National Party lost its parliamentary majority, but at the same time was able to continue to rule under the leadership of Nicola Sturgeon.
Now, in the upcoming elections, SNP members will try to increase their influence in the parliament, using Brexit as a theme in their election campaign. Sturgeon has repeatedly stated that Scotland intends to return to the European Union "as an independent nation."
In 2014, Scotland refused to leave the UK, two years prior to the voting of Brexit. But with regards to Brexit, almost 70% of the region's population voted against it. Therefore, now that the UK has left the European Union, Scotland will most likely leave Britain and then join the bloc in the future.
However, London will not allow this to happen, especially since according to the UK, Scotland has already decided on this issue, which is to remain as its member state. Boris Johnson made it clear that the central government will not go to meet Edinburgh, even though the SNP, led by Sturgeon, continues to seek a second referendum.
Although this issue has already risen before, the topic has been brought back because of the upcoming parliamentary elections in Scotland. It also put pressure on the British pound, thereby making its outlook become quite gloomy.
Another problem for GBP/USD is the persistent rise of COVID-19 infections even amid the ongoing vaccination process in the UK. On January 2, new cases exceeded 57,000. The government has announced that it is considering a lockdown again, especially since a new strain has also been discovered. Tonight, Johnson is expected to deliver a speech regarding this issue, that is, he may announce new quarantine measures. In anticipation of this, the pound depreciated all throughout the markets.
But despite the sharp decline, the general upward trend of the pound remains. If the UK government implements only a 2-week lockdown, the market can immediately win back its position. To add to that, the issue in Scotland is not strong enough to change the trend, since the market considers all statements of political leaders in the elections. Loud statements will put pressure on the pound, but the impact of this factor will be limited.
Therefore, the bullish trend will remain in force until the bears drop the price below 1.3450. In this area, the middle line of the Bollinger Bands coincides with the Tenkan-sen and Kijun-sen lines.
But at the moment, the price is located between the middle and upper lines of the Bollinger Bands, and the Ichimoku indicator demonstrates a bullish signal. In this regard, it is advisable to make trading decisions based on the speech of Boris Johnson. If the pound does not go below 1.3450, long positions may be opened, the target of which is 1.3670 or the upper line of the Bollinger Bands on D1.
