4-hour timeframe
Amplitude of the last 5 days (high-low): 172p - 358p - 351p - 223p - 272p - 680p.
Average volatility over the past 5 days: 377p (high).
It is difficult to describe with words as to what is now happening to the GBP/USD currency pair. The pair declined by 600 points yesterday. Moreover, from our point of view, there were no visible reasons for such a strong collapse of quotes on March 18. We have repeatedly listed a whole list of reasons why the pound should become cheaper in 2020. However, all these reasons were not related to the coronavirus epidemic and did not suggest a landslide. Therefore, now the pound sterling is already exceeding our forecasts. It makes no sense to understand the fundamental reasons now. In times of general panic, it is impossible to say that any one specific fundamental factor influenced the mood of market participants. Most likely, all the factors available to traders play together here.
The pound has been the most unattractive currency in the main basket for the last three years. Who wants to invest in the UK economy and the pound, if the country was recently in a severe political crisis, new elections were held every six months - then the prime minister, then the parliament. The parliament and the prime minister could not agree with each other, the country was losing money and investment appeal, and it is still unclear how Brexit will end. Now, due to the coronavirus, any negotiations can be suspended on a deal that will determine future relations between the UK and the EU. Recall that British Prime Minister Boris Johnson has said repeatedly that all negotiations should be completed in 2020, and by the middle of summer it will become reliably clear whether the parties are moving towards each other or are stuck in a "dead center". In the case of the second option, Johnson was ready to complete any negotiations with Brussels. What about now? Obviously, negotiations were paused for everyone, even though officials tried to calm the markets by being ready to continue working on the deal and hold regular telephone and video conferences for further discussions. But absolutely everyone understands that video conferencing is not the same as face-to-face meetings. Moreover, in any case, negotiations will at least slow down. It turns out that the chances that the parties have time to discuss all the necessary issues during 2020 are even less. Thus, either Michel Barnier and Johnson need to change the approach to the negotiations themselves, go ahead with the deadlines and continue the dialogue, or they can be easily curtailed and Britain will leave the EU in December 2020 without any trade deals, that is, according to "hard" scenario.
According to the latest information, Michel Barnier, the EU's chief Brexit negotiator, has fallen ill with a coronavirus. This was stated by Barnier himself. "I would like to state that I passed a positive test for COVID-2019. I feel good, and my mood is also good. I follow all instructions, as does my team. My message is addressed to everyone affected by this problem and who is isolated: "together we will win ," Barnier wrote on Twitter. Barnier also said that negotiations will continue.
At the same time, US President Donald Trump signed a law that allows him to require businesses to sign contracts for orders that the army needs. According to the president himself, he hopes that the law will come into force only as a last resort and will contribute to raising the production of respirators, masks and ventilators. "In a way, I see myself as a wartime president. I mean, we're fighting. I mean, we have a very tough situation here. For the most part, the American people are amazing," said the odious US leader. Trump also notified the population via his Twitter that the border with Canada is officially closed. "We will be, by mutual consent, temporarily closing our Northern Border with Canada to non-essential traffic. Trade will not be affected. Details to follow!" Trump wrote.
From a technical point of view, the British currency stopped falling, but no upward correction has yet begun. It is difficult to even imagine where and with what force the British currency can move now. In any case, a correction is necessary, but will market participants, who continue to be in an excited state, allow it to begin?
Recommendations for short positions:
The pound/dollar continues its strong downward movement on the 4-hour timeframe. Those traders who remain in sell positions can hold them with targets 1.1243 and 1.1017. Turning the MACD indicator up with a parallel increase in the price may indicate the beginning of a correction. From our point of view, it is currently dangerous to open new short positions.
Recommendations for long positions:
It is recommended to buy GBP/USD only if quotes return to the area above the critical line with the first goal, the upper boundary of the Ichimoku cloud. However, in the near future such a development is not expected. When opening any positions, it is recommended to act as carefully as possible and remember the heightened risks.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicators window.
Support / Resistance Classic Levels:
Red and gray dashed lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movements:
Red and green arrows.
