4-hour timeframe
Amplitude of the last 5 days (high-low): 172p - 358p - 351p - 223p - 272p.
Average volatility over the past 5 days: 276p (high).
The GBP/USD currency pair continues a strong downward movement during trade on March 18. The average daily volatility is already almost 300 points. These 300 points are a one-way movement for the pound. Before the outbreak of the coronavirus epidemic in Europe and the United States, we repeatedly gave forecasts for a decline in the British currency during 2020. We simply did not see any reason for the UK, which is experiencing serious problems in the economy and financial sector and without any coronavirus, to suddenly show growth and improvement in macroeconomic indicators. Moreover, 2020 began with Brussels and London almost falling out over trade negotiations, as both sides took radically opposite positions. Of course, both Britain and the EU called the first stage of negotiations "positive", although nothing could be agreed on. However, we believed in any case that the chances of reaching an agreement on Brexit in ten months (negotiations officially began on March 3) are extremely low. However, with the arrival of coronavirus in Europe and Great Britain, the situation has worsened even more. The markets are in a state of panic all the time, and traders are trading based on their own considerations, without paying much attention to the actions of governments, Central banks, and macroeconomic statistics. By all accounts, the US dollar was, is, and will be the number one currency in the world. Thus, in the event of a crisis, you need to buy it, no matter what. But the logic regarding the British pound is completely different. Despite the fact that the UK is not among the leaders in the number of people infected with the COVID-2019 virus, market participants quite reasonably believe that the epidemic can simply finish off the economy of the UK, which is already experiencing huge problems in the last three years thanks to Brexit. Therefore, no one wants to keep their funds in pounds. Therefore, the pound is falling every day. And most likely, it will continue its decline.
However, now the issue of the epidemic is in the first place. The disease needs to be localized, stop its spread, try to make do with the minimum number of victims and find a vaccine as soon as possible. This is the recipe for a global economic recovery. Once the epidemic is defeated, markets will begin to recover and come to their senses. Without this, in our view, any measures taken by governments and central banks will only mitigate the negative impact of the virus on the economy. And even then, not always.
At the same time, British Prime Minister Boris Johnson continues to "pour" his "optimistic" forecasts about the spread of the coronavirus in all directions. Recall that in recent statements, Johnson warned that many families will lose their relatives, as well as that the epidemic will last until 2021, and as a result, about 80% of Britons will be infected. Today, the prime minister called on the British population to prepare for an outbreak of coronavirus, that is, a sharp increase in the number of infected people. "Without radical action, the number of infections can double every 5 or 6 days," the British prime minister believes. At a press conference in London, Johnson asked all citizens who feel symptoms of the disease not to leave their homes with their families, avoid any unnecessary contact, and work from home. He also warned that the infection could spread at a much higher rate in London. The epidemic in Britain has already killed 71 people. As we reported earlier, most of the victims are elderly.
At the same time, official sources in Downing Street said that all upcoming rounds of negotiations on the future relationship between Britain and the EU after 2020 are being canceled. Recall that each round of negotiations was supposed to take place two weeks after the previous one. However, the general epidemic has made adjustments to these plans. "In light of the latest recommendations regarding coronavirus, we will not formally hold talks tomorrow in the same format as we held the previous round," the UK government said. However, both sides will continue to work on options for the agreement, as well as hold regular video and teleconferences to discuss the future deal.
From a technical point of view, the collapse of the pound's quotes continues. All indicators are directed downward, and there is no sign of the beginning of an upward correction. The MACD indicator is at its lowest values and is discharged from time to time. The pound/dollar pair has already almost worked out the lower limit of the volatility channel on March 18.
Recommendations for short positions:
The pound continues its firm downward movement on the 4-hour timeframe. Those traders who remain in sell positions can hold them with targets 1.1799 and 1.1638. 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:
Buying the GBP/USD pair is recommended only if quotes return to the area above the critical line with the goal of the Senkou Span B line. However, this development is not expected in the near future. When opening any positions, it is recommended to act as carefully as possible and remember 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