The Pound is Not Afraid of Negative News, Sterling Continues to Rise
Over the course of time, the British Pound built up a specific tolerance to bad or really bad news. If earlier investors started selling the Pound each time any information about the Brexit appeared, then now they’ve learned to analyze the news and find what’s the most important.
In the first decade of September, the British parliament started debating a bill concerning the UK’s exiting the European Union. It was the first parliamentary hearing about this and it is very interesting how it will end. David Davis, the Secretary of State for Exiting the European Union, will afford anyone an opportunity to express their point of view.
Basically, they will talk about legislative nuances. There hasn’t been such experience throughout the European Union existence yet, that’s why Europe is learning “in process”. Everyone knows that one of the most important tasks for London is not only the independence of its political and economic processes but the control over the country’s laws as well. Most likely, this is exactly what the debates will be about: the United Kingdom doesn’t deny the all-European legal system but wants to create even more advanced legislation. To do this, there must be a unanimous resolution on this issue, at least.
However, there hasn’t been any progress in negotiations between the UK and the EU recently. Partly, due to the legislative recess that took place in August, partly – due to the absence of clear vision what to do next.
The latest published statistics show that the growth rate of the British economy is slowing down. And the reason is not the Brexit because it hasn’t even started yet. Maybe, it’s due to the fact that companies and enterprises take preventive steps in order to decrease risks, or maybe due to some external factors. One way or another, the real estate market is in drawdown, the tertiary industry in August was weaker than in any other period of time. The all-European decline in consumption has finally reached the United Kingdom and may influence the country’s GDP.
However, the Pound continues rising and doesn’t seem to stop.
If one takes a look at the GBP/USD chart from the point of view of the technical analysis, it can be seen that right now the British currency is more confident in comparison with the USD. Since May 2017, the GBP/USD pair has been trading inside the ascending channel, slowly moving from the support level to the resistance one and so on and so on. However, if the Elliott Wave Theory is applied, one can see that it’s probably not the ascending channel, but the “bearish” phase of the mid-term life cycle and the current ascending movement is just an internal “bullish” correction. Still, if both these methods are taken together to show the overall picture, one may assume that the current support level of the ascending channel is the strong area of the buyers’ interest. After breaking this level downwards, the pair may fall to reach 1.2588, at least. But right now the market isn’t even trying to test this area and, on the contrary, is rising to reach new highs.
The short-term picture for the instrument is the following: the pair may test the upside border of the short-term ascending channel and one of the most probable scenarios implies that it may fall towards the downside border at 1.2970. However, one shouldn’t ignore another scenario, according to which the price may break the upside border. This scenario will simply express the market’s desire to move towards new mid-term and long-term highs.
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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.