Relevance up to 12:00 2020-12-28 UTC+3
Yesterday in the afternoon, Michel Barnier proudly said: “We did it!”. We are talking about signing a document on trade relations between the UK and the European Union after Brexit. This is a real Christmas gift, however, the European Parliament and the House of Commons of the British Parliament must vote “for” this document now. European lawmakers will begin to verify the agreement reached next Monday, the House of Commons of the UK Parliament will try to ratify the deal on December 30, right on New Year’s eve. And here some difficulties may arise, primarily related to the current problem of fishing in British territorial waters. Also, we should not forget that Scotland is opposed to the UK’s withdrawal from the EU and even threatened to hold its referendum on this issue. In general, a lot will depend on the political will of British lawmakers. As for investors, they are encouraged by the agreement reached and the British pound sterling ended the last five days of trading with a strong growth against the US dollar.
Unlike the single European currency, the “Briton” ended the week’s trading with a confident and fairly strong growth against the US currency. The weekly chart shows how volatile and nervous trading was. After falling to 1.3186, the GBP/USD pair turned on the rise and ended the week at 1.3533. However, there are two important points here. First, the bulls on the pound could not break through the strong resistance of sellers at 1.3537. Secondly, the highs of the last candle were lower than the maximum values of the previous candle. A lot will depend on how Monday’s trading opens. And the most important day will be December 30, when the House of Commons will vote on the agreement reached between the parting parties. In principle, British Prime Minister Boris Johnson has every opportunity to extend the deal, since he can enlist the support of at least 80 parliamentarians. If everything goes well and the document is accepted, the pound will fly up and break not only the resistance of 1.3537 but also the strong price zone of 1.3600-1.3620.
However, on the daily chart, the last candle with a sufficiently long upper shadow does not exclude a decline in the exchange rate. When the upper shadow is larger than the bullish body itself, very often this leads to a decrease in the quote. However, the current situation is not quite typical, so we can expect any development of the situation. We just have to wait for the opening of trading on the night from Sunday to Monday and only then build our trading plans.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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