Recently, the pound has been striking with non-technical and irrational price movements, but this is only at first glance if we examine this currency superficially and without going into details. Therefore, before I answer the question posed in the title of this article, it will be very useful to find out the reasons for this behavior of the British currency. After all, if we know what factors influence the change in quotes, then in the future they can be used for successful forecasting and, as a result, make good money on this.
- In the first place is Brexit. Not even the very possibility of Britain leaving the European Union, but the uncertainty associated with this process. Extraordinary parliamentary elections were just to move the scales in one of the parties and finally solve this issue. Because “Tories” scored a majority, now they are fully responsible for the fate of the UK. It was the replacement of the variable with a constant in this equation that contributed to the strengthening of the pound.
- In second place is oversold, which has gotten everyone’s teeth sore. The fact that the pound dollar was oversold was indicated not only by oscillators but also by a significant imbalance between the positions of real market participants.
- The culmination of purchases occurred at a time when trading on the CME exchange was unavailable (00:00 – 01:00) and the transition to a new quarterly futures contract took place. These gaps are most often closed and this time was no exception.
- The culmination of purchases was also indicated by a significant reduction in crowd shorts as prices rose.
- But the subsequent decrease in quotes was also influenced by a significant bias between options. At the moment, the price has been returned to the area where most of the options are out of money.
Now on our agenda, there is a completely logical question: “Will the British currency continues to strengthen after this correction?”
Because on TF N4 we have formed a complete bearish momentum and a reversal pattern “Over & Under” has appeared, then after a short correction I expect GBP / USD quotes to decline.
I will not place a limit order, because according to the rules of the TS, the stop loss will need to be taken out for hi, so I will monitor the pound dollar chart so that in case of a break from sell zone 1.3210 – 1.3225, I can open a sale with a small stop (30-50pp).
If such a setup appears, then I will definitely publish it in the comments on this article.
All profitable trading!