18.10.201908:51 Forex Analysis & Reviews: Hot forecast for GBP/USD on 10/18/2019 and a trading recommendation

All of yesterday, Boris Johnson and Jean-Claude Juncker, in a duet, sang a song about what a wonderful agreement they could make. Almost all the heads of state of the European Union joyfully stated that at last the light flickered at the end of the tunnel, and this booth with Brexit was coming to its logical and successful conclusion. Thus, it has been made clear that today, the European Union will adopt a new version of the divorce deal. At the same time, it was as if forgetting that Europe had already approved one version of the deal, and then everyone said that there could be no other option. But it was not the desire of the House of Commons to accept the previous deal, and even thrice, in fact, caused the resignation of Theresa May. So, to some extent, optimism towards the pound is justified.

Nevertheless, one should never forget about macroeconomic statistics. Even if it is overshadowed by an incredibly inflated information background. Moreover, in the UK, data on retail sales were published, the growth rate of which accelerated from 2.6% to 3.1%. However, they were waiting for acceleration to 3.2%, so at first glance, the data came out worse than forecasts. But it should be noted that the growth rates in the previous month were revised for the worse, from 2.7%, so the scale of acceleration turned out to be exactly as expected. And in any case, the acceleration of retail sales is an extremely positive factor.

Retail Sales (UK):

In addition, US data also favored the growth of the pound. On the one hand, the total number of applications for unemployment benefits decreased by 6 thousand, although they expected a reduction of 2 thousand. In particular, the number of initial applications for unemployment benefits increased not by 5 thousand, but by 4 thousand. The number of repeated applications, which was supposed to be reduced by 7 thousand, decreased by 10 thousand. However, the number of new construction projects decreased by 9.4%. A reduction of 8.4% was expected. But the situation was somewhat corrected by the data on the issued building permits, the number of which could be reduced by 26.0%, but in fact, it decreased only by 2.7%. However, there is a clear decline in the construction industry. But all this pales in front of industrial production data, which until recently had grown by 0.4%, and the United States could boast that, unlike Europe, their industry is growing, not decreasing. There is currently a decline in the industry in the United States, although by only 0.1%. Nevertheless, this is quite a clear sign of the possibility of a recession.

Industrial Production (United States):

There is practically no doubt that the heads of the countries of the European Union will approve a new divorce deal today, which many have been ready for since yesterday. However, the attention of investors and speculators is now shifting to Great Britain, where the House of Commons should already vote for a new version of the deal. But this will happen only tomorrow. So market participants will listen carefully to what British politicians say. Frankly, from what they have already said, they begin to torment vague doubts about the fact that the epic with Brexit is coming to an end. Just yesterday, before everyone had time to comprehend what Boris Johnson and Jean-Claude Juncker said, the representatives of Northern Ireland in the British Parliament openly announced that they would vote against the new deal. According to them, the new version still does not take into account their interests regarding the border between Ireland and Northern Ireland. The head of the Labour Party, Jeremy Corbyn, joined in with their criticism, who generally stated that the deal that Boris Johnson wants to offer is even worse than the one that Theresa May proposed. But Boris Johnson does not have a majority in Parliament, and there is a non-zero probability that the House of Commons will once again extend this entire circus. Along the way, making an attempt to dismiss Boris Johnson, and call new elections.

The GBP/USD pair resumed its vertical course without any significant stops showing enormous volatility and almost reaching the subsequent psychological level of 1.3000. The emotions of market participants, this is what we observed throughout the week, where as such, technical, and fundamental analysis is not particularly functioning, as all attention was focused on the headlines of famous media outlets, regarding the divorce process. The result is stunning, and not quite reasonable, but the vertical growth had some unrealistic volumes. Considering the trading chart in general terms, we see that the oblong correction has moved to the change of the main course, where there are still a number of confirmations to make a conclusion.

It is likely to assume that the pound/dollar pair will remain exposed to the information background, where it is logical to expect a temporary pullback to 1.2770, followed by stagnation expressed in a wait-and-see effect. Concretizing all of the above into trading signals:

- Long positions, we consider in the event of another surge of information and move to a psychological level of 1.3000.

- We consider short positions in terms of a local pullback towards 1.2770.

From the point of view of a comprehensive indicator analysis, we see that the indicators took a single upward position due to the massive background and the impulse move.