The Pound’s Fate Depends on Politicians

The Pound is doing well so far, but the third week of October may change a lot for the British currency. We’re talking not only about the statistical reports, a lot of which are going to be published this week. It’s also about the problems that are in slumber right now but may wake up at any moment.

After the last week, when the Pound was falling in response to the news about possible failures in the Brexit negotiations, the GBP/USD pair had time to recover. Another piece of news, this time related to a possible two-year transition period after the Brexit, helped the pair to rise a bit again. This period may provide enough time to negotiate and agree on all key documents one by one and start living outside the European Union without any unnecessary stresses.

This week, investors are focused on the speech of Mark Carney, the BoE Governor, in the parliament. The main topics are the current approach to the monetary policy and possible reasons to increase the key rate. Carney has already brought investors some hope: his comments about the rate hike were pretty confident, so they convinced investors that the BoE was ready to change its monetary approach in the nearest future. The statistics that were published promoted this idea: the market players thought that the British economy could afford an opportunity not only to exit the trade-economic and political alliance but to tighten its monetary policy as well.

For the Pound, too many things right now depend on politicians and their opinions. The current Pound prices imply that investors are confident in the stability of the British economy and sure that everything will be alright after all. Of course, it will, the only question is when exactly.

The technical chart shows that the GBP/USD pair is still trading inside the ascending channel. However, the truth is that the price hasn’t tested the support level. Not yet.

GBP/USD Daily Chart
GBP/USD Daily Chart

As we can see at the H1 chart, the pair is testing the support level of the mid-term ascending channel. If this level is broken, the price may move towards 1.3125. After completing this scenario, the instrument may rebound and grow to reach 1.3400 or even 1.3590.

GBP/USD 4H Chart
GBP/USD 4H Chart

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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.