Trade24Fx

News background and trade ideas on 24.09.2018

FX:GBPUSD   British Pound / U.S. Dollar
The main news of the past week without a doubt can be called another dead end in the Brexit negotiations. The reaction of the pound is natural and only confirms our basic idea: in fact, the dynamics of the pound is determined today by news from the fields of Brexit. All the rest (macroeconomic statistics, internal political problems, external relations and problems like relations with Russia, etc.) is just a background.

Has our position on the pound changed considering such events? Absolutely not. The failure of Teresa May's mission was expected and predictable. The stake is too big to decide the issue in working order. The parties will raise rates to the last. And only when the clock strikes 12, the deal will be concluded. That is, everything, as expected, will be resolved in a month.

Let us once again recall the essence of the idea that we put forward and based on which we give a recommendation for the purchase of the pound. Markets incorrectly assess the likelihood of a deal between UK and EU (the current consensus is that there will be no deal). As a result, the pound is greatly undervalued. When the deal will be done, the pound will hasten to win back the "undeserved" losses. Our forecasts - the growth of the GBPUSD pair is 1.41-1.43.
Therefore, the current decline in the pound is a positive thing - you can buy it cheaper.

The main event of the forthcoming week is the meeting of the Committee on open market operations of the Federal Reserve System, the results of which will be announced on Wednesday evening. With almost 100% probability FED will raise the rate. This will be the third increase in the FED rate for the year. We interpret this event as a bullish signal for the dollar and recommend its purchase, especially if we consider that recently it has declined.

The best candidate for selling against the dollar is the Japanese yen . Let's remind one more our idea. Waves of trade wars are beginning to reach Japan. Prior to that, the reaction of all countries to the danger was the same - the devaluation of the national currency. So, Japan is very likely to decide to neutralize the negative effect of trade wars and will somewhat weaken the yen.
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