GBP / USD: next stop at 1.3520?

The British pound against the dollar is now forced to respond not only to the news background regarding Brexit prospects but also to events of a geopolitical scale. The threat of a war between India and Pakistan, as well as the failed US-DPRK negotiations in Vietnam, gave strength to the American currency, which again began to enjoy the status of a defensive asset. As a result, the GBP/USD bulls were forced to retreat from the annual highs but not entrenched in the area of the 33rd figure.

It is worth noting that the further movement of the pair is quite difficult to predict. From a technical point of view, the price has the potential for growth. The Ichimoku indicator has formed a bullish signal "Parade of lines" on the daily chart and the pair, itself, is on the upper line of the Bollinger Bands indicator. After this line was broken, corresponding to the 1.3280 mark, the next resistance level is the area of 1.3520, which was the upper limit of the Kumo cloud on the weekly chart. There are no other serious obstacles in technical terms but the fragile fundamental background does not allow to speak with confidence about the implementation of this option.

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The main engine of growth for the pair is the belief that Brexit will be postponed for several months and the country will avoid the chaotic scenario at least in March. Every day this confidence increases and pushes the GBP/USD pair upwards. At the same time, traders currently have little interest in further prospects for negotiations, which will be very difficult. But the market starts at the moment, "here and now", starting from the comments of British politicians and leaders of the EU countries.

For example, German Chancellor Angela Merkel and French President Emmanuel Macron said yesterday in Paris that they were ready to give Britain the opportunity to postpone Brexit "to a later date." However, they did not specify the permissible time frame, whereas earlier Merkel's representatives said that Germany would agree to postpone the key date only for a few months, namely until the end of June. However, this date will most likely become a new "deadline," since Theresa May also mentioned June in her speeches in the context of the extension of the 50th article of the Lisbon Treaty.

Yesterday, the British Parliament approved May's plan for a strategy for further action. Hence, the deputies will give their assessment of the "updated" draft transaction on March 12. If they don't support him, the next day there will be a vote on Brexit without a deal. In case of failure of this option, on March 14, the parliament will consider the option of extending the term of the 50th article of the above contract (in other words, about deferring Brexit).

It is noteworthy that the parliament rejected Labor's legislative initiative yesterday. According to which, Britain remains in the Customs Union and the single market from the EU after the actual exit from the Alliance. After the opposition's fiasco, they again declared that they would submit a question of holding a second referendum to parliament. In spite of the fact that lately laborers are increasingly talking about lobbying for this idea, they have not yet taken any actual steps in this direction. None of the opposition voiced the new strategy while the question of holding a repeated referendum is very difficult from a legal point of view.

By the way, even Labor cannot answer key questions about the second referendum, for example, what then to do with the law that obliges Britain to leave the EU on March 29 this year? From which stage to begin negotiations with Brussels if the British re-agree on Brexit? Or Are the Europeans are categorically against revising the agreements reached? There are many questions such as these but most of them have no answer. One of the representatives of the Labor Party said yesterday that the British would be offered to make a choice between the May deal and the preservation of the country within the EU. However, this idea has not yet found a response among parliamentarians.

In other words, the most realistic scenario is the postponement of Brexit's date and further negotiations between the parties until the end of June. Although the option of approving the transaction is not excluded on March 12, most experts do not believe in it. At the same time, the option of the chaotic Brexit has dropped significantly at least in the context of the coming months.

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All of these allow the pound to further strengthen, if not for one, "but" the deterioration of the geopolitical climate in the world. First, the conflict between India and Pakistan continues. According to a local media, the Pakistani military this morning fired mortar shells at settlements in the Indian state of Jammu and Kashmir. From India, there was also an answer the skirmish lasted about an hour. International mediators have not yet succeeded in bringing the conflicting parties to the negotiating table, hence, the risk of nuclear war still persists.

Meanwhile, talks between Trump and the UN ended ahead of time. The United States did not agree to the conditions put forward by the DPRK. Thus, the leader of North Korea insisted on the lifting of sanctions before the dismantling of nuclear facilities but the American president insisted on the opposite. This news background slightly restored the dollar index position but it's too early to talk about a large-scale trend reversal, while the market still does not believe in a full-scale war between India and Pakistan and the leaders of the United States and the DPRK dispersed to the "ring corners" in a fairly friendly manner.

Thus, if the armed conflict does not get its continuation today, the pound will again try to gain a foothold in the 33rd figure with an eye to achieving the main upward goal of 1.3520.

The material has been provided by InstaForex Company - www.instaforex.com

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