Corona Virus
Stay Safe, FollowGuidance
Fetching Location Data…
Jignesh Davda

Sterling Volatility Likely to Continue Rising

UK Prime Minister Boris Johnson made a bold move last week to suspend parliament. Quite a bit of opposition accompanied this move and efforts to reverse it will take place.

Hearings are scheduled over three days starting Tuesday as Parliament members opposing a no-deal Brexit try to overthrow Johnson’s decision to suspend Parliament in court. There also talks of a no-confidence vote and an election.

Know where GBP/USD is headed? Take advantage now with 

75% of retail CFD investors lose money

Parliament will return tomorrow and will have a small window to take action before returning to recess. For this reason, it is likely to see a jump in volatility for the Sterling exchange rates in the week ahead.

Equity markets are closed in the United States today in observance of Labor Day. This often leads to thin trading in the currency markets. In most cases, currencies tend to trade in small ranges, but there is always the risk of a sharp move during holiday trading as liquidity is quite low during these times.


Technical Analysis

GBP/USD was recovering higher from a low posted on August 11th, but recent price action suggests that the upward move has finished.

The exchange rate has made a clear break below a rising trendline that had supported the recovery. In addition to that there is strong downside momentum and several technical areas have failed to offer support.

Adding to a weaker pound over the past few sessions is a strengthening dollar. The trade-weighted US Dollar index (DXY) has broken to fresh highs and trades at levels not seen in over two years.

GBPUSD 4-Hour Chart

Between a stronger dollar and rising Brexit fears, it seems likely that recovery rallies in GBP/USD will tend to be short-lived. Resistance at 1.2150 is likely to cap recovery attempts.

The pair has already dropped below 1.2094 support, however, a consolidation seems to be taking place. There is still some potential for a small recovery, although the momentum is clearly to the downside.

GBP/USD traders should be mindful of headline news as it can trigger drastic moves. Especially in the US session today considering the general lack of liquidity.

Bottom Line

  • GBP/USD has fallen sharply lower to start the week. Several support areas have broken and the trend has clearly reversed lower.
  • Holiday-thinned trading in the US session sets up the potential for volatile swings in the currency pair.
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.