October 9, 2020 6:46:35
Market Update – 9th October 2020
The GBP has held its price against the USD despite the BREXIT deadline being only days away. Furthermore, to add fuel to the fire, the UK is expected to head back into lockdown due to the escalating Covid-19 cases.
The UK is expected to be split into three tiers of restrictions as soon as next week. Hospital admissions have accelerated over recent weeks which has put pressure on the national health service. Unfortunately, as a consequence, it is likely the death toll may surge in the near future as patients will find it harder to get the treatment they need.
Over in the US, the flip flop decision making by President Trump has caused havoc for USD traders. His U-turn on providing stimulus to the US economy has given risk on traders something to cheer about. The USD has come under pressure as a result. With US equities continuing to grind higher on hopes and speculation, it raises a question about the strength in the underlying foundations of the rally.
There are two technical structures that have caught our attention.
GBPUSD – Technical Analysis
On the shorter-term time frame, we can see the GBPUSD trading on a potential right shoulder line. A technical trader may also recognise the market moving into the right shoulder as a bear flag structure. The shorter-term time frame would suggest a weaker GBPUSD. A potential reason for this structure to play out could come from the UK due to the new restrictions taking place, resulting in a weaker GBP.
Moving onto the longer-term picture, the 4 hourly charts are creating an interesting structure. The GBPUSD has declined significantly throughout October due to the Brexit deadline looming. A short term move towards the 1.28 handle will raise the question of a potential rally on the GBPUSD. The 1.28 support zone will be inline with an inverted head and shoulders formation.
Of course, this is all hypothetical, we will first need to see the GBPUSD 1-hour head and shoulder formation play out, which will likely take the pair towards the 1.28 support. All eyes on the GBPUSD tonight.
If you have any questions on the analysis feel free to reach out.
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