On Monday morning, the GBP/USD tested a strong resistance cluster, which was located from 1.2311 to 1.2356.
In regards to the near term future, the pair had a couple of possible scenarios.
Economic Calendar
As it occurred during the last week, due to the fundamental changes in the markets, Dukascopy Analytics suggest to note the scheduled macroeconomic events, but avoid using historical data for guidance.
Namely, the whole world changes the money supply by announcing monetary stimulus and government expense increases. In other words, the central banks are creating more money and giving it to governments to stop the effects of the coronavirus. In effect, each announcement causes a fall of the currency that it affects.
However, click on the link and take a look at the last reactions to various events in March. Even already ignored events like Producers Price Index and Consumer Price Index caused notable reactions above 20 pips. Previously, the release of these data sets did not cause an increase of exchange rate volatility.
GBP/USD short-term review
At the end of last week, the GBP/USD exchange rate dropped to the support provided by the 200-hour SMA in the 1.2235 area. During Monday morning, the rate reversed north.Note that the currency pair faced the resistance area formed by the 55– and 100-hour SMAs, as well the weekly and monthly PPs and Fibo 50.00% in 1.2311/1.2357.
If the given resistance and support hold, it is likely that the British Pound could consolidate against the US Dollar in the short term.
Otherwise, it is likely that a reversal south could occur in the nearest future, and the exchange rate could decline to the weekly S1 at 1.2161.
Hourly Chart
On the daily candle chart, the pair is located below the daily simple moving averages, which were located from 1.2658 to 1.2856. It signals that the rate could surge.
However, the pair faced the 50.00% Fibonacci retracement level at the 1.2465 level. It can be measured by connecting the March low level with the December high level. This level has kept the rate down since March 27.
On Friday, the rate bounced off the Fibonacci retracement level and begun to decline to the 38.20% retracement at 1.2217, which started to provide support. Namely, the daily chart signals that the rate is squeezed in and could trade sideways.
Daily chart
Read More: Technical Analysis
Long sentiment drops
On Friday, on the Swiss Foreign Exchange 57% of all open position volume was in long positions.
By the middle of Monday's GMT trading hours, the sentiment was 55% long.
Traders have bene closing long positions and opening short positions since Thursday. On that day, the sentiment was 60% long.
By the middle of Monday's GMT trading hours, the sentiment was 55% long.
Traders have bene closing long positions and opening short positions since Thursday. On that day, the sentiment was 60% long.