16.10.202014:16 Trading recommendations for the GBP/USD pair on October 16

The trading week is coming to an end. If we analyze all price movements that occurred this week, we will see that large speculative jumps started when the quote reached the psychological level of 1.3000. In fact, it was with the use of technical analysis that key coordinates were determined, within which price jumps were observed.

The key coordinates are: 1.2860; 1.3060 / 1.3080.

The overall structure, albeit has a wide range, is rather shaky, in which if there is a more dominant activity from certain participants (Bulls or Bears), a breakout occurs, which leads to a further surge in activity.

The trading strategy, as before, gives preference to short-term trading operations, where news, as well as areas of interaction of trade forces, serve as trading signals.

So, if we look at the M15 chart and analyze the trades set yesterday, we will see that many short positions appeared at 06: 45-15: 30, during which the quote moved towards the level of 1.1860. Such a movement is quite identical with what happened to the EUR / USD pair.

In terms of daily dynamics, the indicator recorded 139 points for October 15, which is 13% above the average level. Activity has been high in the market for three days already, which indicates a high ratio of speculative positions in the GBP / USD pair.

This is because following the previous review , traders held the quote below 1.3000 in order to trigger a downside move in the pair. Fortunately, it really occurred and coincided with the earlier trading forecast.

As for the daily chart, it is quite clear that the correction that started from the local low 1.2674 is coming to an end, and it seems that a recovery process is due to begin soon.

With regards to other factors that influence price movement, a slightly weak US labor market report was released, where it was revealed that initial jobless claims increased from 845,000 to 898,000, while second claims decreased from 11,183,000 to 10,018,000. In this case though, the advantage is on the side of second claims, so the US dollar rose evidently in the market.

Another factor was the long-standing issue on the post-Brexit deal, which, until now, has not been resolved. The negotiations started again yesterday, however, the EU only reaffirmed that the transition period ends on December 31, and said that countries should prepare for a British exit without a deal.

"The European Council confirms that the transition period will end on December 31, 2020 and notes with concern that progress in the negotiations on key issues for the community is not enough to reach an agreement. Against this background, the EU is instructing its chief negotiator, Michel Barnier, to continue negotiations in the coming weeks, and urge the UK to take necessary actions to make the agreement possible. In this regard, the European Council calls on all countries and institutions of the community, as well as all interested players, to intensify work at all levels to prepare for all scenarios, including the absence of an agreement. The summit instructs the European Commission to timely prepare proposals for unilateral emergency measures to ensure the interests of the European Union, "the EU summit document says.

London, in turn, expressed its disappointment.

"The UK is disappointed with the decision taken at the EU summit. We are surprised that the EU is no longer committed to working hard to achieve a future partnership "said UK chief negotiator, David Frost

Today, data on US retail sales will be published, and the growth rate of which may slow down from 2.6% to 2.2%.

Exchange Rates 16.10.2020 analysis

The upcoming trading week contains many statistical indicators, including data on inflation and retail sales in the United Kingdom. However, the main driver, as before, will be Brexit, coronavirus and the US elections.

Tuesday, October 20

USA 13:30 - Number of issued building permits (September)

USA 13:30 - Volume of construction of new houses (September)

Wednesday, October 21

UK 07:00 - Inflation

Thursday, October 22

US 13:30 - Jobless claims

US 15:00 - Sales in the secondary housing market (September)

Friday, October 23

UK 07:00 - Volume of retail sales (September)

US 14:45 - Preliminary Services PMI (October)

Further development

As we can see on the trading chart, strong fluctuations occurred in the GBP / USD pair, so we should pay close attention to coordinates 1.2860; 1.3060 / 1.3080, as a breakout from which can lead to strong impulsive waves in the market.

Exchange Rates 16.10.2020 analysis

Indicator analysis

Looking at the different sectors of time frames (TF), we can see that the indicators on the minute period signal BUY, while the indicators on the hourly period signal SELL. The daily period, on the other hand, changed signal from BUY to NEUTRAL, and this is because of the price convergence in the GBP / USD pair.

Exchange Rates 16.10.2020 analysis

Weekly volatility / Volatility measurement: Month; Quarter; Year

Volatility is measured relative to the average daily fluctuations, which are calculated every Month / Quarter / Year.

(The dynamics for today is calculated, all while taking into account the time this article is published)

Volatility is currently at 62 points, which is 49% below the average level.

Since speculative activity remains high in the market and that a bunch of news are still relevant on market sentiment, volatility will continue to jump in the GBP / USD pair.

Exchange Rates 16.10.2020 analysis

Key levels

Resistance zones: 1.3000 ***; 1.3200; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.

Support Zones: 1.2770 **; 1.2620; 1.2500; 1.2350 **; 1.2250; 1.2150 **; 1.2000 *** (1.1957); 1.1850; 1.1660; 1.1450 (1.1411).

* Periodic level

** Range level

*** Psychological level

Also check the brief trading recommendations for EUR / USD pair here.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Viele Grüße,
Analytiker: Gven Podolsky
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