21.12.2020 03:58 PM
GBPUSD - there is a high degree of speculative excitement in the market

With the opening of the trading week, the pound sterling fell by more than 1% in the form of a price gap, the sell-off is caused by a number of factors: Brexit, COVID, the US Congress.

Fear of a hard Brexit

One of the main incentives for the actions of speculators is Brexit, as we remember, the negotiations were interrupted, but at the same time, last weekend was decisive. During informal meetings of negotiators on Saturday and Sunday, the parties failed to reach a result on two key issues: fishing and restrictions on government subsidies for businesses.

Recognizing that time is no longer available to resolve issues, and it is unacceptable to leave without a deal, the parties come to the conclusion that negotiations should continue until the very end – on December 31, hoping for a miracle.

"Negotiations remain difficult and significant differences remain. We continue to explore every path to a deal that is consistent with the fundamental principles that we have brought to the negotiations," a UK government spokesperson said late Sunday evening.

The lack of a breakout over the weekend will only add to the tension surrounding the talks and the risk of a last-minute failure that investors fear.

Closing borders

Meanwhile, with Brexit negotiations failing to produce results, Prime Minister Boris Johnson is trying with all his might to fight the new strain of coronavirus that has left London locked in the highest level of danger and the UK's borders closed.

"The new strain of COVID-19 is out of control and the only way to bring it back under our control is to limit social contact," says UK Health Secretary Matt Hancock.

The fear caused by the new strain of coronavirus and restrictive measures drives speculators of the pound sterling, provoking a large round of sales.

The fear caused by a new strain of coronavirus and restrictive measures drives speculators out of the pound sterling, provoking a large round of sales.

Waited for the action of the US Congress

After months of inaction, congressional parties agreed on a $900 billion stimulus package.

"Congressional Democrats have reached an agreement with Republicans and the White House on emergency coronavirus assistance and a comprehensive package that will provide much-needed capital to save lives and provide a livelihood for Americans," House Speaker Nancy Pelosi said on Twitter.

In the short-term effect, the stimulus package will inspire dollar positions, but it is worth considering that the current movement is due to the first two factors.

Analyzing the trading chart of the past days, it was repeatedly noticed that the pound sterling is strongly overbought, and the upward movement is provoked solely by speculative positions.

The levels of 2018, where the quotes were so confidently fixed, are unjustified expectations that lead to only one result – a collapse, which we have so often written about in reviews.

As for the market dynamics, there is a high speculative hype without third-party tools, which leads to large price changes in the market.

Looking at the trading chart on the scale of a weekly period, you can see that the long-term downward trend is still relevant in the market, but now the quotes are at the conditional peak of the medium-term upward trend.

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In terms of the economic calendar, important statistics for the UK and the United States are not expected to be published on Monday, all attention will be focused on the information flow of BREXIT and COVID.

Analyzing the current trading chart, you can see that the trading week began with a price gap, approximately 117 points in the downward direction. This gap is caused by the information flow during the weekend. The hype of speculators is off the scale, almost immediately after a huge gap, the quotes continued to decline and at the moment the scale of the weakening of the pound sterling is more than 2%.

The scale of the price change is striking, it is likely that speculators will continue to work on a negative background, where the local minimum of December 11, at 1.3134, stands on the way. In this area, there may be a regrouping of trading forces, in simple words – stagnation.

The main trading tactic, as before, is to analyze the information flow for positive and negative news on burning topics: Brexit & COVID

Example --->

Positive news on Brexit leads to the strengthening of the pound sterling.

Negative news on Brexit leads to a weakening of the pound sterling.

Information can be extracted from our website in the Analytics section, as well as directly from the media, for example, Bloomberg, Wall Street Journal, Reuters.

According to the trading recommendation from Friday, the market will open with a price gap and we will know in advance about the direction of the market, you had the opportunity to enter the position right after the gap.

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Indicator analysis

Analyzing a different sector of timeframes (TF), it can be seen that the indicators of technical instruments unanimously signal a sale due to an intense downward move, which left no chance for an alternative signal. in fact, the indicators are driven by speculative hype, which can lead to versatile signals

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The volatility for the week / Measurement of volatility: Month; Quarter; Year

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

(December 21 was based on the time of publication of the article)

The dynamics of the current time is 250 points and this is without taking into account the gap, which is very much and comparable to the dynamics of the spring of this year

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Key levels

Resistance zones: 1.3300**; 1.3650**; 1.3850; 1.4000***; 1.4350**.

Support areas: 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

Gven Podolsky,
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