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What is happening with the pound can be called a perfect storm. Although a better definition would be free fall. Against the background of general hysteria, it quickly reached the previous record low, and this was enough to test the new values. The disaster lies in the fact that it was there that the last footsteps were standing, behind which there is nothing left. So as soon as they were demolished, the pound went into that same free fall into uncharted depths. Looking at this, you can't help but think of Mark Carney's words about the parity of the pound with the dollar. However, he appealed to the unpredictable consequences of Brexit. And it is difficult in economic terms. In fairness, it should be noted that yesterday's fall was not without the help of Brexit, as the initial impetus was the reports that the negotiations may break down. Representatives of Brussels said that they are now not up to negotiations with London, as there are more important problems. Naturally, referring to the coronavirus. So the fear of the coronavirus and the panic in the financial markets were reinforced by a reminder that the UK could face an extremely sad economic future.
It is clear that when the market is in free fall, without any point of support, any macroeconomic data does not matter at all. Especially since only data on the construction sector in the United States were published, which has never been of great importance. However, the number of construction permits issued decreased by 5.5% rather than 3.4%. The volume of construction of new homes decreased by 1.5%, which was slightly better than forecasts predicting a decrease of 4.6%.
The volume of construction of new homes (United States):
The rebound suggests itself after such a rapid fall. Moreover, practice shows that after setting new record values, both lows and peaks, quotes always retreat. And the fall of the pound was extremely impressive and large-scale. Moreover, from a formal point of view, this will be done today in the form of data on applications for unemployment benefits in the United States. Their total number should increase by 14 thousand. In particular, the number of initial applications for unemployment benefits may increase by 8 thousand, and repeated applications by another 6 thousand. However, yesterday's data did not affect the market in any way, so at this point in time, the significance of many macroeconomic data is zero. And we may well see the pound continue to fall.
Number of repeated applications for unemployment benefits (United States):
In terms of technical analysis, we see an update of record lows, where the quote broke the mark of 1.1957 from September 3, 2019 and then went into free fall with the lowest value of 1.1452. In fact, the foot broke everything that was, and the panic did its job, where we saw nothing else but inertia. It is worth noting that with this movement, technical levels, like all the laws of technical analysis, were not particularly useful, so the work was carried out on a local course in the direction of inertia.
Looking at the trading chart in general terms, we see that the global downward trend is again at stake, and the quote is already at the levels of thirty years ago.
It is likely to assume that in terms of logic, this kind of fall should have overheated the position so much that a rebound is simply necessary. At the same time, the panic has not gone away , so you need to carefully monitor the behavior of the quote and the current lows, so in case of a fix lower than 1.1452, inertia can resume.
We will concretize all of the above into trading signals:
- Long positions are considered higher than 1.1550, with the prospect of a move to 1.1650.
- Short positions are considered if the price is consolidated below 1.1450, with the prospect of a move to 1.1350.
From the point of view of complex indicator analysis, we see that technical instruments are under pressure of downward inertia, having a single sell signal.
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