For the first time since July, the GBP / USD pair dropped below 1.2770, largely due to strong bearish sentiment in the market. The correction from 1.2770-1.3000 has already ended, and the impulse on September 1 has acquired a new scale, which calls into question the medium-term upward trend.
This current market crash is actually similar to the March collapse, as both have the same technical labels. In addition, the downward move that started around 1.3500 is the same as the impulse on December 13, 2019, and the movement below 1.2770 indicates the prevailing bearish interest, which is also the same as the dynamics in the earlier months.
However, this ongoing impulse has a higher chance of changing, especially if the quote continues to consolidate below 1.2770. A continued decline will result in an upward reversal, which will make the acceleration different from the March collapse.
Thus, making hasty actions is a big NO, as it may lead to a depressing loss of profit. An unstable market will deliver unprofitable medium-term positions, so the optimal trades in such a case are local positions.
Anyhow, if we look on the M15 chart, we will see that short positions arose around 10: 00-11: 15, and 15: 15-18: 00, during which the quotes reached the price level of 1.2770.
In terms of daily dynamics, a 53% acceleration was recorded, and the indicator coming out at 190 points is considered the third largest record since the beginning of September. The slowdown last Friday became a starting point for speculators who managed to accumulate trading volumes and accelerate by 120% (86 ---> 190 pip).
In addition, just as discussed in the previous review , traders were ready for a downward move after a consolidation below 1.2900. The entrance to the market may be quite late, but it has lesser risks in trading. [Recommendation: Open short positions from 1.2860 / 1.2885 and take profit around the level of 1.2770.]
So, if we look at the daily chart, we will see that with the current update of local lows, the recovery relative to the medium-term upward trend is 37%.
With regards to news, one important event was the speech of Fed chairman Jerome Powell, during which he happily reported the improving US economy.
"Many economic indicators are showing marked improvements. However, employment and overall economic activity remain well below their pre-pandemic levels, and the path forward remains highly uncertain. The way forward will depend on maintaining control over the virus and political action taken at all levels of government, "Powell said.
Meanwhile, another surge in COVID-19 incidence has been observed all over the world, so as a result, many countries are at a high risk of re-introducing lockdown or quarantine.
One of which is the United Kingdom, where 4,378 new cases of infection were detected over the past day.
"Nobody underestimates the problems that individuals and entrepreneurs will face with the introduction of new measures. We know it won't be easy, but we must take further action to control the spike in cases and protect the national health service, "UK Prime Minister Boris Johnson said.
Starting Thursday, food outlets in Britain will have to close two hours before midnight, else, the police will issue fines in the amount of £ 1,000 and make detentions in case of violation of the social distance of two meters in pubs and restaurants.
Today, data on home sales in the US secondary market will be published, which may grow by 0.9%. However, the main incentive for speculators will be the updates for coronavirus and the long-running Brexit.
Further development
As we can see on the trading chart, the surge of short positions led to a movement below 1.2770, in the direction of 1.2620 - 1.2500. If the market sentiment remains as it is, movement could stretch all the way to the variable level of 1.2885.
Indicator analysis
Looking at the different time frames (TF), we can see that the indicators on the minute period signal BUY, while the hourly and daily periods signal SELL due to the strong movement below the previous daily range.
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 123 points, which is almost the same as the average value.
It is assumed that if the trend changes into bullish, price will jump, perhaps even higher than the current amplitude.
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.
