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The past trading week was another triumph for the bears, as the pound decreased again in value by another 508 points. As of the moment, the full scale since September 1 is already 717 points, the base level of which is 1.2770.
If we look at the M15 chart, specifically on the trades for last Friday, we will see that the characteristic overheating of short positions happened in the market due to high volatility. During it, the quote reached the control levels, however, there was no consolidation.
In terms of daily dynamics, a value of 100 points (!!!) was recorded.
It is by no means low, and if you remember that on Friday, the market was in a stagnation, having a 100-point volatility is a lot.
This is due to the traders working for a consolidation below 1.2770, as discussed in the previous review .
Such resulted in a strong downward movement on the daily chart, which is quite similar to the March collapse.
With regards to news, one important but somewhat negative was the contraction of the UK GDP, which fell from 8.7% to 6.6%, well below the forecast of 6.7%. This is because industrial production fell to -7.5% in July against a forecast of -8.9%, and the volume of construction decreased by -12.7% over the same period.
At the same time, data on US inflation was also published, which turned out to be better than the forecast. It came out 1.3% from 1.0%, instead of just about 1.2%.
However, these statistics failed to influence the market in any way, largely because as before, the market is controlled by emotions.
The continuous disagreement around Brexit continues to affect market sentiment.
Just recently, UK Prime Minister Boris Johnson said that the European Union is threatening a food blockade.
"We are being told that the EU will not only set tariffs on goods moving from the UK to Northern Ireland, but that it could effectively stop the transport of food from the UK to Northern Ireland," Johnson said.
In turn, Chief EU negotiator Michel Barnier said on Twitter that the agreement "is not a threat to the integrity of the UK."
Barnier stressed that the EU does not refuse to include the UK in the list of third countries for food imports: "To get on the list, we must know absolutely everything about the rules in the country, in particular for imports. The same objective process applies to all the listed countries. "
Today, September 14, the House of Commons of the British Parliament will vote and discuss a draft law on the internal market, which contradicts the provisions of the Brexit agreement, already adopted between the UK and the EU.
Voting and its results can give a new round of jump in the pound.
Further development
As we can see on the trading chart, GBP / USD continues to trade around the level of 1.2770, specifically within the range 1.2763 / 1.2863. Such a scenario is classified in the market as accumulation, which ultimately leads to a natural acceleration. In any case, the best strategy is to work for a breakout in order to exit the price range.
To do this:
- Set up long positions from 1.2863 to 1.2885l or
- Set up short positions from 1.2763 to 1.2700-1.2620.
At the same time, keep being updated on the issue of Brexit, as such continues to put pressure on the market.
Indicator analysis
Looking at the different timeframes (TF), we can see that the indicators in hourly and daily periods signal sell, due to the strong bearish sentiment in the market. However, it may change once the quote breaks out of the upper limit of the channel.
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 87 points, which is 27% below the average value. However, activity will grow as soon as the accumulation ends.
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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