Like the euro, the GBP / USD pair is still under a correction, however, the only difference is that the pound has a high degree of speculation amid a high concentration of information noise. Thus, as a result, the quote fluctuated more than 350 points, which is almost the same as the surge last March.
The main driver of this development is the uncertainty over latest news, especially in the UK and the US. Hence, it is important to always monitor the occurrences around the world, as such will enable traders to be on the wave of speculative jumps as quickly as possible.
One example is the pattern on the M15 chart for the GBP / USD pair, which, if we review closely, we will see three bursts of activity: 08: 30-09: 45 [DOWN]; 12: 00-12: 30 [UP]; 13: 45-14: 45 [DOWN]. It is quite a rare occurrence when full-fledged V-shaped formations can be seen in such a short period of time.
In terms of daily dynamics, the indicator has recorded as much as 158 points, which is 26% higher than the average level. This suggests that the amount of speculative positions is off the charts, and that this is definitely not the end.
So, if we look at the trading chart in general terms, that is, the daily period, we will see a correction, during which the quote practically touched the psychological level of 1.3000.
The news yesterday was the impetus for such a development, and this is the EU's legal action against the UK over the controversial internal market bill. According to European Commission President Ursula von der Leyen, the Commission has sent an official letter to London, notifying the country of its breach of obligations. The first speculative jump in the pound occurred during this time.
"This is the first stage of the procedure for violating the law. This letter invites the United Kingdom to provide us with its comments within one month, "von der Leyen said.
A spokesman from the British government said that the UK will respond in due time, but at the same time defended that London just wants to protect the integrity of the British home market and the Northern Ireland peace process.
In turn, EU chief negotiator Michel Barnier said that the EU gives an absolute priority to the full and effective implementation of the Brexit treaty.
In another note, the latest report on jobless claims in the US was published yesterday, and the data for which indicated that the US labor market continues to recover. According to the report, initial applications for unemployment benefits have decreased from 873,000 to 837,000, while repeated applications have reduced from 12,747,000 to 11,767,000.
The US Department of Labor will add up an employment report today, publishing the latest unemployment rate in the country. The projection is a drop from 8.4% to 8.3%, and a rise of about 915.00 new jobs outside agriculture.
The upcoming trading week has a sparse economic calendar. Thus, the pound will move according to the latest news, particularly on Brexit, COVID-19 and the US elections.
Monday, October 5
UK 09:30 - Service PMI (September)
US 15:00 - ISM business activity index for the services sector (September)
Tuesday, October 6
US 15:00 - JOLTS (August)
Wednesday, October 7
US 19:00 - latest FOMC protocol
Thursday, October 8
US 13:30 - jobless claims
Friday, October 9
UK 07:00 - volume of industrial production (August)
UK 07:00 - volume of construction (August)
Further development
As we can see on the trading chart, the constantly high speculative activity in the market led to large price jumps in the GBP / USD pair. So, as a result, a zigzag pattern has formed on the M15 chart. Meanwhile, the correction is clearly seen on the daily chart, during which the pound practically traded at a quote of 1.3000.
Now, the pound is most likely to continue a bullish momentum, but it will just be a local move. Everything could change once the US trading session starts, that is, a reversal towards the level of 1.2830.
Indicator analysis
Looking at the indicators on the different time frames (TF), we can see that the minute, hourly and daily periods signal BUY, and it is because of high speculative activity in the market.
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 currently at 115 points, which is already very high considering that it is speculators who are the main drivers on the market.
Key levels
Resistance zones: 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.
