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In continuation of the bearish trend, GBP / USD reached a price level of 1.2770 yesterday, relative to which there was a slowdown and correction in the market. Having high volatility also led to local overheating of short positions, which resulted in oversold technical indicators.
As a matter of fact, seeing a correction is completely normal, especially if market activity is stable. However, in the current situation, the market is controlled by emotions (initially caused by the coronavirus crisis, and now Brexit), thus, the correction from 1.2770 is possibly just a temporary error.
In any case, the goal is still to make profit from the market, which means that local operations remain to be the best strategy to combat speculation.
So, if we analyze the M15 chart for trades opened yesterday, we will see that long positions arose at 10:00 - 14:45, during which the quote moved upwards from 1.2770 to 1.2917. Then, afterwards, the quote underwent a reversal.
Such activity gave GBP / USD quite high volatility, amounting to 143 points, which is 14% higher than the average level. This suggests that speculation is also high within the market.
What did most of the traders set up in the market yesterday? Just as discussed in the previous review , long positions were opened from 1.2863 to 1.2885, in order to trigger a breakout from the previous price range (1.2763 / 1.2863).
Thus, in the daily chart, we will see a movement of more than 700 points, and this is the fastest decline seen in GBP / USD since the March collapse. In terms of price level, the pound returned to the prices reached on July this year.
With regards to news, the controversial UK bill, at which British Prime Minister Boris Johnson plans to cancel a number of provisions in the Brexit agreement, has been reported to pass into second reading by the House of Commons, having a ratio of votes by 340 against 263.
However, quite many parliamentarians and experts disagree with it, for example, former British Prime Ministers David Cameron and Theresa May spoke out against it.
At the same time, a weak report on the UK labor market was also published, which revealed an increase in unemployment rate by 4.1%. Applications for unemployment benefits also jumped by 73.7 thousand. Nonetheless, the market was not particularly affected by it, since traders are focusing on the issue with Brexit.
In the afternoon, data on the US industrial production is due to come out, and its rate of decline should slow down from -8.2% to -6.1%. However, this report is rather secondary, so it does not have a serious impact on market activity.
Further development
As we can see on the trading chart, GBP / USD traded around 1.2885, fluctuating within a range of 1.2814 / 1.2917. If pressure on the pound drops slightly, a correction will occur in the direction of 1.3000, but if not, the quote will move towards the main pivot at 1.2770.
Indicator analysis
Looking at the different time frames (TF), we can see that the indicators in minute and hourly periods signal BUY due to a correction from 1.2770. The daily period, on the other hand, signals SELL due to the downward move from 1.3480.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Volatility is measured relative to the average daily fluctuations, which are calculated every Month / Quarter / Year.
(The dynamics for today is calculated, all while taking into account the time this article is published)
Volatility is at 84 points, which is 32% below the average value. However, it will continue to grow due to abundant speculative interest.
Key levels
Resistance zones: 1.2885 *; 1.3000 ***; 1.3200; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Zones: 1.2770 **; 1.2620; 1.2500; 1.2350 **; 1.2250; 1.2150 **; 1.2000 *** (1.1957); 1.1850; 1.1660; 1.1450 (1.1411).
* Periodic level
** Range level
*** Psychological level
Also check trading recommendations for the EUR / USD pair here , or brief trading recommendations for the EUR / USD and GBP / USD pairs here .
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