02.01.202011:33 Forex Analysis & Reviews: Analysis and trading ideas for GBP/USD for January 2, 2020

Hello again everybody!

Well, the year 2019 ended, which the British pound spent under the influence of the "divorce" process between the UK and the European Union. Naturally, the price dynamics of the GBP/USD currency pair (as well as all other pairs) were influenced by trade contradictions between the US and China. However, Brexit plays a special role for the pound and, by the way, the euro. Let me remind you that as a result of the victory of the conservatives led by the current Prime Minister Boris Johnson, Great Britain must leave the EU within this month, that is, until January 31. What will happen next and how the completion of the divorce process will affect the dynamics of the British currency is, of course, an interesting question. I would venture to assume that all pairs with the pound will experience increased volatility, accompanied by sharp and strong movements, and in each direction.

In this regard, I suggest looking for an answer to the question about the further direction of GBP/USD on the price charts. Since we just closed December, let's start with the monthly timeframe.

Monthly

For the pound-dollar pair, the December trading ended with strengthening, but there are several important points to note here. First, it is the long upper shadow of the December candle. Second, a false breakout of the iconic resistance level of 1.3380. Another negative point was the inability of the pair to enter and consolidate the December closing price within the Ichimoku indicator cloud.

Of the positive signals, it is worth noting the closing of the last month above the Kijun line and 50 simple moving average. The first trading in 2020 began negatively for the pair. At the time of writing, there is a moderate decline and trading is conducted near 1.3217.

If the downward trend continues, I recommend watching the price behavior near 1.3170. It is here that the previously broken Kijun and 50 MA converged. Of course, the schedule is monthly and various price flights are possible, but nevertheless. We simply denote this figure - 1.3170. In the case of a resumption of the rise, we look at what will happen near 1.3313. This is where the lower boundary of the Ichimoku indicator cloud lies, which can resist growth attempts. These are, in my opinion, the nearest landmarks at the bottom and top of the monthly chart. We pass to smaller timeframes.

Daily

After the rapid growth shown on the last day of last year, trading on January 2 opened with a price gap down. Thus, the assumptions about the gap, which we will see after the opening of trading on January 2, were fully justified.

On the technical side, you should pay attention to the presence of bearish divergence of the MACD indicator. Day diver - this is serious, if it starts to work out or at least discharge, it will not seem enough! This means that you need to be extremely careful with purchases and open only if there are good signals.

Support on the daily chart can be provided by the Kijun line at 1.3170 and Tenkan at 1.3093. At the same time, the mark of 1.3170 was already mentioned in this review. The nearest resistance is represented by the December 31 highs at 1.3282. Only a true breakout of this level will open the way to a strong technical area of 1.3380-1.3420. Naturally, this will not happen immediately and, most likely, not today. While the market is swinging in anticipation of new drivers for the movement.

By the way, the price dynamics of the GBP/USD pair can be affected by data on the PMI manufacturing activity index from the UK, which will be published today at 10:30 (London time). From the American reports, it is worth paying attention to the initial applications for unemployment benefits, which will be released at 14:30 (London time).

So, it makes sense to consider sales after the pair rises to the price area of 1.3260-1.3280, and purchases after the decline to the area of 1.3200-1.3170. That's all for now. Good luck!