Statements by German Chancellor Angela Merkel that the EU and the UK could come to an agreement on Brexit by Oct. 31 have caused the pound to strengthen and the GBP / USD pair to rise to 1.2273, which corresponds to a 3-week high.
However, on Friday, the decline in the pound and GBP / USD pair resumed. Investors are still betting on the further weakening of the pound, since the risks of the “hard” Brexit remain.
“We are ready” for the hard Brexit scenario, French President Macron reiterated, while Boris Johnson said that Britain is also intensely preparing to leave the EU without any agreement.
Meanwhile, investors expect the beginning (at 14:00 GMT) of the speech of the head of the Fed Jerome Powell at the symposium in Jackson Hole. Market participants want to understand the Fed's future plans for monetary policy.
Several Fed leaders, as follows from the minutes of the July 30-31 meeting, believe that rates should be left unchanged because “the real economy remains in good shape”.
Despite conflicting signals from the Fed management, many market participants still expect one or two more Fed rate cuts this year, and the first reduction is already at the Fed meeting on September 17-18.
The long-term negative dynamics of GBP / USD prevails. In case of breakdown of the short-term support level 1.2150 (ЕМА200 on the 1-hour chart) GBP / USD will go towards the support level 1.2000 (2017 lows and the Fibonacci level 0% of the correction to the GBP / USD pair decline in a wave that began in July 2014 near the level 1.7200).
Short positions are preferred.
Support Levels: 1.2175, 1.2150, 1.2100, 1.2000
Resistance Levels: 1.2265, 1.2340, 1.2480, 1.2530, 1.2730
Sell by market. Stop-Loss 1.2280. Take-Profit 1.2175, 1.2150, 1.2100, 1.2000
Buy Stop 1.2280. Stop-Loss 1.2190. Take-Profit 1.2340, 1.2480, 1.2530, 1.2730