Technical and Fundamental look on GBP/USD - Where is the best trade?

Technical view of GBP/USD

The price is in the long-lasting trend of flash crash on 7 October 2016. since it managed to register ever higher tops and higher bottoms. After reaching the last peak, the price forms a Double Top formation, which is activated last week - a high probability of a short-term correction. 50 and 200SMA are bullish cross and over 50SMA - positive for GBP. Long positions of the current levels will be controversial and very risky, and for this reason a good deal requires a deeper adjustment of the pounds. The price is currently at Double Top, but also at 23.6% Fibonacci correction and close to 50SMA, while Demarker is entering an over-sales area - mixed signals and lack of clear Price Action.

Fundamental - Brexit and Bank of England, what can we expect?
In her latest statement, Teresa May called on the Brexit team to strive for a high level and to ask the EU for a good trade deal. "Never compromise," May said, adding that he wanted an agreement with the EU to allow cross-border trade without customs duties on goods and access to the banking and insurance markets. At the same time, it wishes to retain control over British taxpayers' migration and money (without membership fees to Europe). Such comments, as expected, have a strong negative impact on GBP, and in addition, last week, the Bank of England did not take steps to tighten monetary policy. Nevertheless, positivism alongside the tightening of monetary policy in 2018. remains. Mark Carney, managing director of Bank of England, said he expects interest rates to rise earlier and higher than expected. In the long run, traders will appreciate this positively. For this reason, we expect the upward trend in the pounds to remain.

Where to position yourself?

The levels in the range between 1.3550 and 1.3600 are good for positioning with long positions, but only after a clear Price Action and a signal that bulls take precedence. Given GBP short-term fluctuations and signs of dollar bulls wake up, we expect the downward movement of GBP/USD to remain in the strong support area where we are looking for an entry with a long and a stop below the basic diagonal - below 1.3500.

Alternative Scenario: If the price goes below the support area and stays there in several successive bars, the positive scenario will be spoiled and more likely to see a decline in GBP

Jr Trader Petar Milanov

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