Yesterday, the GBP/USD pair continued to concentrate on the variable range 1.2674/1.2775, confirming the fact that the price was consolidating below the support level of 1.2770. A consistent decline indicates a change in the price trend in the medium term, and even if the variable amplitude enters a correction stage, this will not be the end for the downward development.
Now, we should take about the pound's impressive decline in the period of 1-2 months, where the weakening by 800 points is only half of the possible move. The scale is large, but we should not forget that the market is highly susceptible to the information background, where local price surges may occur depending on the incoming information on COVID and Brexit. Thus, even if there are signals about a changing trend, we should not forget that a local approach to trading positions in 2020 is considered the most significant on the market.
A local operation means staying in a position for 1-2 days with a following change in the algorithm, depending on the market situation.
Analyzing yesterday's fifteen-minute TF, you can see that the quote has been moving within the range of 1.2674/1.2775 for as long as 48 hours, which indicates the process of regrouping trade forces at new price levels.
In terms of daily dynamics, the activity slowed down by 27% relative to the average level, which is confirmed by the stage of price consolidation in a variable amplitude. We can confidently say that it is a local slowdown, and we will see another surge in the market soon.
As discussed in the previous review, further declines are considered in the market even if the current amplitude turns into a correction.
Looking at the trading chart in general terms (daily period), you can see a slight resemblance to the March collapse, but not really since the rate of price change is even lower compared to the example above.
Previous news background included weekly data on applications for unemployment benefits in the US, where growth is recorded instead of decline in volume. Moreover, primary applications rose from 866,000 to 870,000, where the previous data was revised downward from 860,000 to 866,000. In turn, repeated applications fell from 12,747,000 to 12,580,000, but their decline was predicted to 12,339,000. At the same time, the previous data was revised downward from 12,628,000 to 12,747,000.
The market reaction to the statistics was ignored.
In terms of the information background, everyone is worried about the second wave of COVID-19, where the UK sets records for the daily increase in new cases for the second day in a row. The global cases are growing insatiably, but restrictive measures have so far been reintroduced only in a number of countries. The main question is whether the restrictions will be fully deployed, since this will directly affect the economy. So, the risk of repeating the March collapse remains in the market.
In terms of the economic calendar, we have data today on orders for durable goods in the United States, where they forecast an increase of 1.5% in August.
The upcoming trading week is expected to be filled with events in terms of statistics (see the list below). An additional incentive for speculators is the endless information background related to the coronavirus and the Brexit divorce proceedings.
[All time zones are in Universal Time]
Tuesday, September 29
UK Lending Market - 8:30 UTC+00
- Volume of consumer lending by the Bank of England (August)
- Number of approved mortgages (August)
- Volume of mortgage lending (August)
USA 13:00 - S & P/CaseShiller House Price Index for July.
Wednesday, September 30
UK 6:00 - GDP (Q2)
USA 12:15 - ADP report on employment in the private sector, for September
USA 12:30 Moscow time - - GDP (Q2)
Thursday October 1st
USA 12:30 Moscow time - Claims for unemployment benefits
Friday, October 2
USA 12:30 - report of the US Department of Labor
- Change in the number of people employed in the non-agricultural sector
- Unemployment rate
- Average hourly wages
Further development
Analyzing the current trading chart, we can see a local surge of activity relative to the boundaries of the previously set amplitude, but with the current market situation, even a corrective move will not change much. A price consolidation below 1.2700 has already been noticed, and the set decline from September 1 continues to be the focus of interest of the market.
The prospect of developing short positions is really great, but first you need to complete the stage of regrouping trading forces, which is expressed in the amplitude of 1.2674/1.2775 and the current impulse.
If the expectations for the downward development coincide, a movement in the direction of the 1.2000 level in the near future will be expected.
Indicator analysis
Analyzing different sectors of time frames (TF), the indicators of technical tools on minute and hourly time frames signal a buy due to a local surge of long positions. The daily TF, as before, signals a sell, focusing on the renewal of local lows.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(It was built considering the time of publication of the article)
The volatility of the current time is 62 points, which is 49% below the average. It can be assumed that the speculative excitement will try to disperse the market even at the stage of regrouping of trade forces.
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
