21.08.202002:35 Forex Analysis & Reviews: Overview of the GBP/USD pair. August 21. Brexit negotiations continue. Boris Johnson will have to rebuild the economy and keep Northern Ireland and Scotland as part of Britain

4-hour timeframe

Technical details:

Higher linear regression channel: direction - upward.

Lower linear regression channel: direction - upward.

Moving average (20; smoothed) - sideways.

CCI: 67.0898

The British pound also settled slightly below the moving average line following the fall that began the day before yesterday. However, due to the fact that the fall began quite abruptly and unexpectedly, the moving average line could not go too far up, and now the price is very close to it. On August 20, sellers failed to continue moving the pair down. Thus, none of the previous local lows were updated, and fixing the price above the moving average line will return the bulls to the market at all. Thus, we would not rush to declare the end of the upward trend. It may still resume despite the fact that the pound is heavily overbought, there were no special reasons for the growth of the British currency, but, nevertheless, traders continue to sell the US dollar, so in general it may continue to fall in price. A new COT report will be released today, which could show a reduction in buy-contracts for non-profit traders, however, this is unlikely to happen, since the report will cover only the period of August 12-18, and the fall in the British pound quotes occurred on August 19.

Very little macroeconomic information has been received from the UK recently. And most importantly, there is no information about the progress of negotiations on the relationship between the UK and the European Union after the end of the "transition period". Thus, "who is still there", and the pound still has little reason to strengthen. As we said earlier, if everything is relatively calm and good in the European Union, which really contrasts with what is happening in the US, the situation in the UK (economic and political) is no better. The economy is clear. The loss of 20.4% of GDP in the second quarter is the highest among all EU countries, among which the Kingdom will not be listed very soon. But the political situation is not so clear. We have been skeptical of Boris Johnson and his manner of governing since day one, repeatedly criticizing him. By and large, in more than a year of his rule, Johnson won few victories. He can only be credited with bringing Brexit to an end and not delaying the process for several more years. However, what is blood? We are sure that any politician could have taken the country out of the EU in such a way as Johnson did. After all, think about it, Johnson did not agree with Brussels on a "soft divorce", he did not manage to conclude a trade deal, and what will happen after the "transition period" can only be guessed, although all economists as one continue to say that the British economy will be dealt another blow due to the complete severance of ties with European companies. It is to the EU countries that more than 50% of exports from the UK are sent. Thanks to Boris Johnson, who simply "took the axe" and cut all the ropes that stretched from Britain to the EU, the bloc and the Kingdom will now trade under WTO rules. That is, with duties, quotas, and so on. And now tell me, what did Johnson do so special for Great Britain? Nothing. Moreover, in the best traditions of Donald Trump, Johnson tried several times to play dishonestly. First, he blocked the work of the Parliament in order to take the country out of the EU unhindered and in the way he wants. Before that, he kicked out of his party all those who did not support his views on Brexit. Thus, at the head of Britain is just a smaller copy of Donald Trump. A little later, the British government completely failed to fight the "coronavirus" in the Foggy Albion, as well as his colleague and friend across the ocean. And if two more friends worked for each other, there would be a lot to forgive. But there is no trade deal between the United States and Britain yet. There are no negotiations between London and Washington. And Johnson, apparently, is very much counting on this deal. It seems that he really believes that "friendship" with Trump will help him. However, Trump can leave his post in six months and then have to negotiate with another President. In general, we believe that the UK is headed by the same ambiguous leader as the US.

At the same time, we should not forget that almost the main task of Johnson is not to restore the economy now (this is already clear), but to keep Scotland and Northern Ireland as part of the United Kingdom. We have already written several times about the fact that Scotland is trying to leave the EU since 2014, when the first independence referendum was held. However, at the time, most Scots thought it would be better to remain part of the Kingdom. Now the majority (according to opinion polls) believe that it would be better to leave the Kingdom and return to the European Union. However, to do this, you need to get official permission from London to hold a second referendum, and it is obvious that London will not give the "go-ahead" for this. However, the events of recent decades show that a region does not always need "good" from above to leave or join another state or bloc. Just as it is not always possible for the government to reassure its population, which does not want to live by the new rules or vice versa, in the old way. The events in Ukraine and Belarus are a clear confirmation of this. Thus, it is quite possible that one of these scenarios is also possible in Scotland. And there is nothing to say about Northern Ireland, which has been in conflict with the British authorities for decades. Its residents are clearly not happy that the island of Ireland will now have a border, customs and border crossing system, even if it will pass by sea.

Thus, we once again point to the fact that the reasons for growth in the pound are few. And we once again point out that you still need to trade in accordance with the technical picture, since it best reflects what is happening now in the market.

The average volatility of the GBP/USD pair is currently 122 points per day. For the pound/dollar pair, this value is "high". On Friday, August 21, thus, we expect movement within the channel, limited by the levels of 1.3069 and 1.3313. Turning the Heiken Ashi indicator upward will indicate a possible new round of downward correction.

Nearest support levels:

S1 – 1.3123

S2 – 1.3062

S3 – 1.3000

Nearest resistance levels:

R1 – 1.3184

R2 – 1.3245

R3 – 1.3306

Trading recommendations:

The GBP/USD pair is trying to resume the upward trend on a 4-hour timeframe. Thus, today it is recommended to consider new longs with the goals of 1.3245 and 1.3306, which could be opened after fixing the price above the moving average,and hold them until the MACD indicator turns down. It is recommended to open sell orders no earlier than fixing the price below the moving average with the goals of 1.3062-1.3000.