18.02.202113:30 Forex Analysis & Reviews: GBP/USD: UK's unemployment spike will not hinder sterling growth as market speculation continue to propagate

Based on a survey by Imperial College London and Ipsos Mori, coronavirus infections in England have dropped significantly in recent weeks compared to January.

Signs that a national lockdown is containing the pandemic is good news for Boris Johnson, who is under intense parliamentary pressure to ease quarantine measures and help the UK economy recover from its worst recession in 300 years.

In the coming days, the Prime Minister should announce a roadmap for forthcoming actions, which will focus on easing quarantine measures. Therefore, the news that the situation with the coronavirus is improving directly pushes Johnson to ease restrictive measures, and this pushes speculators to senselessly build up long positions in the pound sterling.

In my previous reviews on the UK economy, I have already touched on such topics as the consequences of Brexit, the coronavirus crisis, as well as the gap in the economy on a scale of several hundred years.

This time we will talk about unemployment.

According to a recent survey, about 2.6 million people in the UK, or 8% of workers, expect to lose their jobs in the next three months, suggesting long-term damage to the economy from the coronavirus.

These figures include people who have already been told they will be laid off, with young people and the lowest-paid workers most at risk.

The analysis found that about 2 million people were unemployed or on vacation in the past six months, making them more at risk. A separate survey by the British Chambers of Commerce found that a quarter of the 1,100 companies surveyed plan to cut jobs if government support programs end as planned.

Based on the data given above, unemployment in the country is only in the early stages, and what can happen in just a few months is of great concern to strategic investors.

It is worth grasping the simple point that those citizens who have not worked longer than others risk losing skills and missing out on earnings growth, and for those who have been on vacation for the past six months, this is 21%, they are already preparing for notice of dismissal.

While the UK economy is falling into the abyss, the pound sterling rushes into space, there is no logic, and the endless speculation in the market, which contradicts common sense, is to blame.

What happens on the trading chart?

Recently, we saw a pullback from the area of the psychological level 1.4000 (1.3950/1.4000/1.4050), where market participants managed to lower the rate of sterling by 122 points in two trading days. Given the colossal overbought level of the pound sterling, this kind of pullback is considered a minor price change in the market.

Conventionally, the quotes continue to be at the peak of the medium-term trend, and if we take into account the recent bursts of long positions caused by expectations of easing quarantine measures, we can say with complete confidence that speculators work with a very narrow perspective on global problems.

In simple words, we jump to the place where they are shouting, and now they are shouting that the easing of restrictive measures is coming.

Expectations and prospects

Taking into account the irrational distribution of information flow among speculative expectations, we can say that the pound sterling only postponed its outcome in the form of a full-size correction, which sooner or later will come to the market.

If we assume that the understanding will come too late, when the economic problems will no longer be impossible to ignore, then instead of a correction, another collapse in the value of the sterling may occur.

If you still consider further speculation, which may not be so bad in terms of trading, then subsequent long positions can be opened if the price fixes above 1.3950 with the prospect of a move to 1.4000.

The most radical deals will come after the price is held above 1.4050, in a four-hour period, which may lead to an increase in the value of the sterling to the maximum of 2018.

What is happening in the market in terms of indicator analysis and market dynamics?

By analyzing different sectors of time frames, traders see a buy signal relative to all major time frames. This signal arises from the fact that the quotes are at the very peak of the trend

In terms of market dynamics, not so high volatility indicators are visible, but even due to them, an inertial upward movement is maintained in the market, which focuses on speculators

Key levels

Resistance zones: 1.4000 ***; 1.4350 **; 1.4550; 1.4700; 1.5000 ***.

Support Zones: 1.3750 **; 1.3650 **; 1.3300; 1.3000 ***; 1.2840 / 1.2860 / 1.2885; 1.2770 **.

* Periodic level

** Range level

*** Psychological level