Several reasons for buying GBPUSD

1 mai 2018

Sales in the GBPUSD pair are quite massive. In our opinion, this is the result of simultaneous imposition, but it is still far from an occasion to write off a pound from accounts. Rather, on the contrary, storming down the border of the medium-term range 1.3700-1.4260 is an occasion to think about buying. Because the entry point is almost perfect. The profit / risk ratio is very attractive in it: the profit can be put in the upper border area of 1.4260 (which is equivalent to 500 points in plus), while the stop should be placed below 1.3650 (that is, the risk of the deal is about 70 points), Thus, the ratio of the ratio of 7 to 1, which is simply superb. But in addition to the fact that there is an excellent access point, a set of arguments is needed in favor of the consistency of the position as such.

We divide the arguments into two blocks - technical and fundamental. Because it is very important to see the whole picture, and not its individual fragments.

Let's start with the technical reasons for buying a pair already here and now.

1. The pair has reached the lower boundary of the medium-term range, which in itself is a signal that the probability of a reverse from the current prices is the maximum.

2. Daily closes behind the lower Bollinger band indicate a statistical anomaly in the price dynamics of the pair. And this means that for a long time it can not continue. The anomaly is a short-term phenomenon.

3. The pair is oversold even on the daily chart. For example, RSI (8) is close to the mark 20. Thus, the current downward movement as a minimum needs a correction to discharge the indicator.

The slow average (we are talking about the EMA with a period of 44) is parallel to the axis, that is, there is no reason to say that the range has been transformed into a downward movement. And this means that the corridor of 1.3700-1.4260 has not lost relevance. And this brings us back to the first point and confirms it.

Now let's move on to the fundamental block.

1. Let's start with the fact that the causes that influenced a sharp increase in the pound during 2017 have not gone away. The balance of fundamental forces in the pair has not undergone global changes. So, the fair price of the pound versus the dollar has not changed either. Thus, what happens in a pair is the divergence of the current price from the equilibrium price. The classic result of most divergences is convergence - price convergence, that is, a price returns to equilibrium. Accordingly, from this point of view, one can expect the pair to grow.

2. Brexit as a basic cause of the weakness of the pound in 2016 somewhat lost in relevance. The reason is that the markets have simply reconciled themselves to this fact. And the conclusion of a transitional agreement between the EU and the UK only contributes to the growth of this calm. Accordingly, panic selling of the pound in this light is not expected.

3. The dollar, which has recently strengthened strongly in the foreign exchange market (April was the best month for the dollar since the election of Trump), does not look very sure. Inflation in the US has reached the Fed target which means that the Central Bank has less and less arguments in favor of aggressive actions in terms of tightening monetary policy. Which in turn can lead to a sharp decline in the degree of rhetoric of the Fed. Already on Wednesday, we can get the first signals in this direction, which of course will hit the dollar and therefore lead to the growth of the GBPUSD pair.

In total, in our opinion, there are plenty of reasons for the growth of the GBPUSD pair. Both technical and fundamental. Current points are extremely attractive for purchases. Therefore, our recommendation is to buy GBPUSD from the current pair with targets in the region of 1.4000 (conservatively) or 1.4250 (aggressively). Place stops below 1.3650.