4-hour timeframe
Amplitude of the last 5 days (high-low): 165p - 233p - 172p - 358p - 351p - 223p.
Average volatility over the past 5 days: 268p (high).
The GBP/USD currency pair calmly continued its downward movement during trade on March 17. If the European currency paired with the US dollar slightly corrected, the pound sterling just continued to fall. It is impossible to say that today the next drop in the British pound was triggered by some fundamental or macroeconomic data. Yes, several reports were published today in the US and UK, but they were not so significant as to provoke such a strong movement of the pair. Thus, the reason why we continue to see the strongest depreciation of the British currency every day is because of panic. We would like to remind you that at the very beginning of the month, when the panic was just beginning, many experts believed that the US dollar was falling (at that time, it was the decline of the greenback) because the US stock market began to collapse. What about now? US stock markets continue to crash almost daily. Key stock indexes have already lost about 30% of their February highs. But at the same time, the US dollar is becoming more expensive against both the pound and the euro. This is especially true for the British currency. Thus, in both cases, the reasons for the dollar's growth does not depend on the US stock market, the collapse of the price and demand for oil, or other obvious reasons. Also, it is not that market participants abruptly believed in the dollar and began to consider it the safest currency again.
At the same time, US President Donald Trump dramatically changed his rhetoric about the coronavirus. If earlier the US leader said that the virus will not survive in April-May (the warm season of the year), and that "the US is completely in control of the epidemic," then yesterday he said that "no country in the world controls the disease." Moreover, when asked specifically whether the country is heading for a recession, Trump replied: "it's possible. But we are not looking at the situation from the point of view of a recession, but from the point of view of fighting the virus. As soon as we stop it, there will be an incredible unmet demand in both the stock market and the economy. When this is over, I think you will see an incredible growth." President Trump remains true to his style. According to many experts, the coronavirus outbreak can greatly weaken Trump's political ratings. After all, the main reason why it is necessary to choose Trump in the upcoming elections was called the strong growth rates of the economy and the stock market since he came to power. Simple economic calculations show that if the pandemic continues to spread, the US economy could fall back to 2016 levels. On the one hand, the president can always explain the decline of the economy by the Chinese pandemic, over which he has no control. However, over the past three years, there have been too many events (trade wars, impeachment, constant quarrels and insults to the Democrats) of a scandalous nature associated with the name of Trump. The electorate can recall all of "his merits" at once. After such comments by Trump, the S&P 500 and Dow Jones stock indexes collapsed by 11 and 13%, respectively.
At the same time, more and more experts are coming to the conclusion that the Fed no longer has anything to influence monetary policy. Rates have been reduced to almost zero, a $700 billion QE program has been announced, and these actions have not yet had any favorable impact on the stock market. The situation is no better in the UK, where all the same problems. In the current conditions, we still believe that technical factors are the most informative and useful for predicting the movement of any pair or instrument.
Today, data on unemployment, wages and applications for unemployment benefits were published in the UK. We cannot say that these reports turned out to be a failure, but rather generally neutral, because the unemployment rate increased to 3.9%, wages increased by 3.1% (with a forecast of +3.0%), and the number of applications for unemployment benefits was lower than expected by experts. However, as you can easily guess, this statistic did not have any effect on traders. The pound sterling still continued to fall. The last report of the day-industrial production in the United States – exceeded the forecast values, but this excess does not make any sense, because by the end of March, there may be a very impressive drop in all indicators, including industrial production.
A strong downward trend continues from a technical point of view. Therefore, the general recommendations remain the same - trading "according to the trend." Why try to guess a reversal up, if not one indicator is signaling it now.
Recommendations for short positions:
On the 4-hour timeframe, the pound/dollar continues its strong downward movement. Those traders who remain in sell positions can hold them with targets 1,1996 and 1,1956. Turning the MACD indicator up with a parallel increase in the price may indicate the beginning of a correction. To open new short positions, from our point of view, is now dangerous.
Recommendations for long positions:
Buying the GBP/USD pair is recommended only if quotes return to the area above the critical line with the goal of a first resistance level of 1.2895. 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 about the increased 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.
The material has been provided by InstaForex Company - www.instaforex.com