British Pound: USD/GBP (GBP=X) Falls to New Lows
Sterling lost ground against major currencies on Wednesday despite the 330 Billion Pound bailout package by the British Government amid coronavirus pandemic.
Global financial markets are in turmoil as investors are dashing to cash out, selling what they can sell. GBP investors are in a panic as the Cable lost more than 1,300 pips in just nine days over recession fears. The Bank of England slashed interest rates from 0.75% to 0.25% on March 11 in a move to bolster the economy during the Coronavirus crisis.
UK’s economy has been hit hard by the Coronavirus outbreak, as the Government urges public to work from home where possible and avoid “non-essential” travels and mass gatherings, which have stalled economic activities across the country. An Interest rate cut from the Bank of England didn’t prove to be a support either as panic escalated among GBP traders as they were not convinced that it was “enough”.
With the virus outbreak continues to spread at a rapid pace in the UK, especially in London, Transport for London has reduced its services across the London network, and Prime Minister Boris Johnson warned that he is prepared to take “further and faster measures” to tackle the outbreak when necessary, which means London may face a lockdown as early as Friday.
A London lockdown may cause serious economic pain as the Centre for Economics and Business Research estimated that a day of lockdown in London would cost £495 million per day, and London is directly responsible for approximately 20% of UK’s GDP.
As of writing, global confirmed Coronavirus cases surpassed 210,000 with the number of deaths close to 9,000. The UK reported a massive increase of 676 cases in less than 24 hours and the total number of deaths reached 104.
The economic impact of COVID-19 on the UK’s economy has been significant as the British Pound lost more than 10% of value against the US Dollar in less than 10 days. GBP struggled against the Euro as EURGBP jumped above 0.92200 while GBPCHF dipped below 1.14300, a level not seen since September 2016.
On the technical side, GBPUSD on the 4-Hour timeframe has been following a downtrend since March 9. The price registered the lowest level of the period under study at 1.17519 on March 18. As of writing, the GBPUSD is hovering around 1.17800 with negative Moving Average Convergence Divergence and Momentum below the 100 level.
The pair is currently trading below the 50-period simple moving average with Relative Strength Index below 50 which supports the recent bearish price move. Resistance level lies at 1.32029 while the support level lies at 1.17519. Bears are trying to push the price below the 1.17000 level.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 1.26.
The projected upper bound is: 1.19.
The projected lower bound is: 1.12.
The projected closing price is: 1.16.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 9.9720. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 8 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 20.73. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 68 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -137.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 8 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 6 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed up 0.010 at 1.158. Volume was 80% below average (consolidating) and Bollinger Bands were 400% wider than normal.
Open High Low Close Volume___
1.148 1.159 1.140 1.158 21,601
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.23 1.28 1.27
Volatility: 26 17 12
Volume: 128,674 113,381 110,980
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX GBP= is currently 8.7% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume out of GBP= (mildly bearish). Our trend forecasting oscillators are currently bearish on GBP= and have had this outlook for the last 50 periods. Our momentum oscillator is currently indicating that GBP= is currently in an oversold condition.