Politics May Support Sterling :: InvestMacro

by RoboForex Analysis section

GBP/USD is balanced at 1.1987 on Monday. The British Pound remains under pressure despite the recent recovery caused by political news.

The drama of British Prime Minister Boris Johnson’s resignation seems to be accelerating – it’s going to be a long story. First of all, the Conservative Party has to find a new leader, and it will certainly take some time. Until then, Johnson will continue to perform his duties. Second, there is a cabinet reshuffle – some ministers have resigned due to disagreement with current policy, while others may be reassigned by the next prime minister. Market rumors say such global changes in British politics may resolve some aspects of political uncertainty. For example, the Bank of England may finally raise interest rates. If so, nothing but positive for the pound.

Currencies rarely respond to political changes in a positive way, but the British Pound could have plenty of opportunity here.

As we see on the four-hour chart, after rebounding from 1.2042, the GBP/USD is forming another descending wave towards 1.1837 and it may consolidate there. Later, the market may correct a test of 1.2042 from below and then resume trading within the downtrend with the target at 1.1700. From a technical point of view, this scenario is confirmed by the MACD Oscillator: its signal line is moving below 0 and may continue to decline to update the bottoms.

On the H1 chart, having completed the descending impulse at 1.1919 along with the correction to 1.2020, the GBP/USD pair forms another descending structure towards 1.1944 and may consolidate later there. If the price breaks this range lower, the market may resume moving inside the downtrend with the short-term target at 1.1856, and then start a new growth to test 1.1944 from below. After that, the pair may resume its decline towards 1.1837. Technically, this scenario is confirmed by the Stochastic Oscillator: after breaking 50 and reaching 20, its signal line is expected to return to 50, bounce from it again, and resume the decline to retest 20.

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Any expectations herein are based on the author’s own opinion. This analysis may not be treated as trading advice. RoboForex assumes no responsibility for trading results based on Trading recommendations and reviews contained here.

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