Figure 2: The GBPUSD on a daily chart
What matters now is whether the current support holds the price. If so, the pound could make some correction to some of the resistance levels, where it might be a place to consider short trades. If support breaks, we expect price to drop to another psychological level 1.10.
The key levels of supports and resistances are:
is in the band 1.1950 - 1.2020. Especially 1.20 is important psychological level.
is in the zone 1.2180 - 1.2200.
is on the level 1.2540-1.2570.
is located in the band 1.1400 - 1.1470. Here, there is a Fibonacci extension 127.2%.
is in the region around the level 1.10. Here, there is Fibonacci extension 161.8%.
is a parity with the USD around a psychological level 1.00
In addition, we present the overall sentiment of the market, which, according to the COT (Commitment of Traders) report, that is presented every Friday, shows that last week the big speculators reduced their long positions as the number of contracts decreased from the previous 26,300 to 18,600. The decrease of positions could suggest that large speculators are beginning to be cautious about strengthening of the pound. This is the second reduction of long positions in a row.
What awaits us this week?
The next round of Brexit negotiations is now postponed due to the coronavirus pandemic. Given the short time initially set for the negotiation of the trade agreement, this is currently a negative news for the pound.
Regarding macroeconomic data, the PMI data will be reported in Britain on Tuesday. On Wednesday, there will be presented the inflation data and on Thursday we will see the retail sales. There is also planned another meeting of the Bank of England on Thursday when a high volatility can be expected.
In addition, the traders will monitor the development of coronavirus contagion very carefully.
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