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GBP/USD: the Brexit theme remains decisive in the dynamics of the pound

16 November 2018, 14:43

TifiaFX

The British pound stabilized on Friday after a sharp decline on Thursday on Brexit-related concerns. On Thursday, it became known about the resignation of the British Minister for Brexit Dominic Raab. Six members of the government also resigned.

The pound fell on Thursday even despite the plan submitted by the British Prime Minister Theresa May on the exit from the European Union, approved by the British parliament on Wednesday.

"This decision will be under scrutiny, but this decision is based on the best interests of the UK", said May.

At a press conference on Thursday evening, May defended her version of an agreement with the EU. “This is such a Brexit that meets the priorities of the British people”, she said. If you do not move forward, it will mean “choosing a path leading to deep and dangerous uncertainty”, in her opinion.

The pound also remained under pressure on Thursday after official data released, according to which retail sales in the UK fell by 0.5% in October compared with September, with an expected growth of 0.2%.

European Commission President Tusk said on Thursday that the EU wants a political declaration on a future agreement with the UK to be submitted by November 20, and a meeting of EU leaders on this issue will be convened on November 25.

Probably, the pound will remain under pressure as long as uncertainty remains regarding Brexit.

At the same time, the US dollar maintains its position, despite a slight decrease in the dollar index DXY. On Friday, at the beginning of the US trading session, the DXY dollar index, which tracks the US currency against a basket of 6 other major currencies, is trading near 96.85, after DXY reached a 16-month high at the beginning of the week, exceeding 97.50.

Fed Chairman Jerome Powell on Thursday reiterated that the US economy is in "good shape". It is widely expected that the Fed will raise the key interest rate in December, and then raise the interest rate several times in 2019.

This is a strong fundamental factor in favor of further strengthening the dollar.

*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

Support and Resistance Levels

After GBP / USD dropped sharply on Thursday, the pound rose on Friday and GBP / USD recovered.

Nevertheless, despite the recovery of the pound, short positions are preferable until clarifying the situation around Brexit. A meeting of EU leaders on this issue will be convened on November 25.

Long-term negative dynamics prevails below the key resistance level of 1.3210 (ЕМА200 on the daily chart and the Fibonacci level of 23.6% of the correction to the decline of GBP / USD in the wave that started in July 2014 near the level of 1.7200).

The signal for opening long positions and the beginning of an upward correction will be the return of GBP / USD to the zone above the short-term resistance level of 1.2980 (ЕМА200 on the 4-hour chart, ЕМА50 on the daily chart).

Support Levels: 1.2730, 1.2660, 1.2500, 1.2365, 1.2110, 1.2000

Resistance Levels: 1.2860, 1.2915, 1.2980, 1.3030, 1.3210, 1.3300