GBP/USD - Impact of COVID, BREXIT, Trump & Biden on speculators

There is a rich information flow and literally everything can be grabbed. Although, there is no need to rush, because everything is still ahead.

As evidenced by the recent rally of more than 120 points in a modest two hours, speculative positions are gaining momentum. The reasons and consequences are hidden in the volume of positions on the US dollar, which instantly broke the record for the past weeks. The dollar strengthened on all fronts, perhaps business activity statistics played on the emotions of the US economic recovery, and perhaps an early insider on Biden and Janet Yellen, which was played by major players.

COVID and BREXIT

British Prime Minister Boris Johnson officially announced that the national quarantine will end next week, which can be considered as positive news, but not so simple.

The quarantine will be replaced by a more stringent three-level system of regional restrictions, designed until the spring of 2021.

Here are the restrictions:

Level 1

More lenient measures will be provided, bars, pubs, restaurants are open until 11 PM. The maximum number of people allowed in the room is 6. Sports activities are available, including fitness centers, but with restrictions of up to six people at a time.

Major events, sports, and performances are allowed, but limited to 50% capacity or a maximum of 4,000 people outdoors/1,000 indoors (whichever is lower).

Level 2

Pubs, bars, and restaurants will be restricted or closed. Fitness centers are closed, but outdoor sports are allowed.

Major events, sports, and performances are allowed, but limited to 50% capacity or a maximum of 2,000 people outdoors/1,000 indoors (whichever is lower).

Level 3

Bars, pubs, and restaurants are all closed except for takeaway or delivery. The indoor entertainment center is closed. Tourist tip: avoid leaving the level 3 zone, reduce your trips. No overnight stays outside of the local area, except for work and study. Exercise and sports activities can take place outdoors, but not more risky contact activities. Major events are prohibited. Entry events are allowed.

Boris Johnson recalls that the risk of a worsening situation with COVID-19 is still high, and the winter will be harsh.

As a matter of fact, we have improved in terms of lifting the strict quarantine, but the containment measures will have an impact on consumers, tourism, and the country's economy for a long time to come.

In turn, another rumor on the divorce process Brexit appeared, this time from the Prime Minister of Ireland. He said that the contours of the deal are already clear and by the end of this week, an agreement may be concluded. According to him, there is progress even on issues such as fishing and competition, which is considered surprising, and if this is the case, it is now clear why the pound has recovered so quickly after the decline.

It is worth considering that such statements from high-ranking officials have already been met in the history of Brexit, they do not give 100% guarantees that everything will happen. Thus, it is still too early to exclude a hard outcome from consideration.

"Fundamental differences still remain, but we continue to work hard on a deal," Michel Barnier, the EU's chief negotiator, tweeted on Monday.

From the material above, it can be noticed that there is plenty of leverage for new rallies. Now, you should not focus on the medium-term perspective, since local bursts of activity can be quite large, instead you should work together with speculators.

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In terms of technical analysis, an intense downward movement in the front of 16:15-18:00* on November 23 (time at the trading terminal*) can be seen, where the quote found a resistance point near the coordinate of 1.3400, and then went down to the limits of 1.3265 on an inertial move.

The movement was local in nature, where the recovery of the pound sterling was not long in coming. It is worth noting that holding the price above the level of 1.3300 increases the chances of buyers for a subsequent upward movement.

The quote continues to face the maximum of the previous day, but the main peak is considered to be the level of 1.3480 from September 1. In this case, a breakdown of the value of 1.3480 will lead to the resumption of the medium-term upward trend.

As for the market dynamics, the speculative hype that leads the quote to accelerate is clearly visible. It is worth recalling that the signal of the upcoming acceleration was received last Friday. The signal was an abnormally low daily activity – 49 points.

On the trading chart in general terms (daily period), it can be noticed that the area of 1.3480 reflects not only the maximum of 2020, but also a trace from 2019, where the quote found a resistance level in the same area.

Today, in terms of the economic calendar, there are hardly any statistics worth paying attention to for Britain and the United States.

Analyzing the current trading chart, it can be seen that the upward potential that took place during the Asian and early European sessions dissipated around noon, when sellers returned to the market again.

The level of 1.3300 again plays the role of a barrier and distributor of trading forces, whether sellers will be able to overcome it is not yet clear. The natural basis associated with the level leads to a reduction in the volume of short positions, and this leads to a slowdown.

As before, the decisive signal will be a four-hour candle, since depending on whether the level is fixed above or below, the subsequent move in the market will be clear.

It is worth noting that the information flow continues to affect the quote's dynamics, so do not forget to track the latest topics of Brexit, COVID for new information.

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Indicator analysis

Analyzing a different sector of timeframes (TF), it is clear that the indicators of technical instruments only signal a sale in a minute interval, while the hourly and daily periods indicate an upward development. The schedule of trading forces may change if the price fixes below 1.3300 on a four-hour period.

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Weekly volatility / Volatility measurement: Month; Quarter; Year

The volatility measurement reflects the average daily fluctuation, based on the calculation for the Month / Quarter / Year.

(November 24 was based on the article's time of publication)

The dynamics of the current time is 87 points, which is even lower than the average level by 27%, but the speculative hype is clearly visible in the market. In the future, there may still be an acceleration in the market.

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Key levels

Resistance zones: 1,3480; 1,3600; 1,3850; 1,4000***; 1,4350**.

Support areas: 1,3300**; 1,3175(1,3200); 1,3000***; 1,2840/1,2860/1,2885; 1,2770**; 1,2620; 1,2500; 1,2350**; 1,2250; 1,2150**; 1,2000*** (1,1957).

*Periodic level

**Range level

***Psychological level

The material has been provided by InstaForex Company - www.instaforex.com