The rates continue within the upward trend. However on the chart we can see formation of new, flat trend. Moreover, there is every reason to expect that, given the extremely difficult situation with Brexit and the political crisis. Since the end of February, we have seen a stop in the growth of the pound against JPY, and can talk about reaching a price peak. At the same time, problems with a process of leaving the EU will have a negative impact on the British economy, which will necessarily affect the economic indicators.
The only factor that kept the upward trend in favor of the GBP for a long time was the weakness of other currencies. In particular, Japan is experiencing a significant economic downturn that negatively affects the value of JPY. In addition, the demand for risky assets, in recent years, is not as high as before. Recent reports indicate the continuation of negative trends in the Japanese economy: the Tankan large manufacturers index is decreasing, inflation is far from the target level, industrial production output and GDP are decreasing, while manufacturing PMI index of business activity, slightly rose to 49.2 pips in February, but remains below 50, indicating a comprehensive economic downturn.
Thus, both currencies are under significant pressure, which causes the rates in a flat trend in March. At the same time, it is expected that the problems with Brexit will exert increasing pressure on the GBP, given also the ghostly prospects of a successful exit from the crisis and probability of a tough exit scenario from the EU. This is already affecting the British economy. In particular, today data on the indices of business activity in the service sector of the leading EU countries were published: Italy, Germany, France, Spain, Britain, and the Eurozone as a whole. Indices rose above investor expectations - in all countries except the UK, where the index fell from 51.3 points in February to 48.9 in March.
Next week will be key for GBP. New reports on production volumes and trade balance will be published. But the main event will be approaching the final date of exit from the EU - April 12, when Britain can leave the EU without any deal. There are less than 10 days, and the less - the cheaper will cost GBP, in the absence of any agreement. In this situation, the most effective in the short term would be the deals to Sell, as also confirm with MACD, Stochastic oscillators.
