Quite often recently I’ve been analysing the British pound in relation to the American dollar, which is a pair of GBPUSD. This is due to the fact that there are quite clear formations there, indicating only the “right” direction – south.

It all started at the end of March, when the “death cross” appeared on the daily chart – that is, the SMA50 moving average crossed the SMA200 from above. This is quite a strong signal of imminent declines.

GBPUSD death cross
The GBPUSD Daily – the death cross, a double top and a broken neck line – three bearish hints of what the direction for this pair would be.

In April another bearish formation was being built – head and shoulders, left and right arm and ‘head’ appeared. In addition, the head of formation with the right arm formed a double top formation, which further strengthened my bearish approach to the pair.

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The formations described can be seen in the H4 chart below, and a description of what these formations can signal is included in the previous analysis of this pair.

GBPUSD H4 - head nad shoulders
GBPUSD H4 – RGR is about 400p, which can be a sign of similar drops on this pair measured from the neck line (green

If my forecasts are correct, we can expect the next week to see a continuation of the declines to a round 1.2000 and perhaps even lower, as the nearest demand zone is only around 1.1980.

An additional factor supporting the downside scenario are the news coming from the UK.
In the Sunday times, an article was published which mentioned, among other things, that the UK has stepped up its efforts in the event of exit from the EU without a trade treaty (no deal Brexit). Senior government officials said that the UK is preparing to break off trade talks with Brussels next month if the EU does not support their demands. . A psychological war has begun… who will force who to make concessions?

Read this: GBPUSD – the death cross, last nail in the coffin ? – 13.05.2020

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