Good evening traders and welcome back to another article where we will be looking at the Pound against the US Dollar. As we make our way into a new quarter, it is useful to look at the quarterly chart to get a sense of where price is headed and where we have came from.
Looking at the quarterly chart, we can see that interest rates being slashed and stimulus being needed was inevitable with the coronavirus and this has caused a huge spike into the downside. This isn’t just your average crash as this is the lowest price the Pound has traded at.
However, recently , those losses were somewhat gained back and we have seen the quarterly candle close back above support. Should this level hold over the coming weeks and we see the UK flatten the curve, stabilising coronavirus cases, we may see a flight back into the Pound after the ATL’s ( all time lows ). The quarterly is useful for spotting major levels for a currency pair and looking for guidance in the coming weeks/months, however this is highly impractical to execute trades off of. The quarterly chart is highly influenced by fundamental themes such as Brexit / Corona Virus / stimulus packages and interest rates.
Looking at the weekly timeframe, we can see the two prior weeks formed a tweezer bottom as well as a bullish engulfing. The importance of last week’s candle lies in the closure. We have seen a closure back above the quarterly support level and the bodily closure is engulfing the prior candle’s wick. A clear weekly resistance level we can see is the psychological level of 1.27500. Let’s drop down to the daily timeframe to get a closer look at price action.
Dropping down to the daily timeframe, we can now see price has clearly begun to slow down and stabilise above 1.23250. There is a potential for a 3 pin pattern to form to the upside as we have roughly 5 hours to close the daily candle. Below the quarterly level, we have a psychological level of 1.22500 which will be key for price to continue its ascent. 1.27500 is looking ever so clear as an upside target . If the long bias is invalidated, we will take it step by step with 1.20000 being the next point of call.
Looking at the 4 hour timeframe, we can see consolidation in the form of a pennant. In general technical analysis, we anticipate a steep upside movement once the pennant is broken and retested in a bullish scenario. Should price break the ascending trend line that creates the pennant, we could find support on a third touch of the ascending outer trend line.
On the 1 hour timeframe we can see the consolidation more clearly. Price has tested the quarterly once again and seen a reversal. Looking closely at this, we may have an inverse head and shoulder pattern forming to sling price back into 1.27500 and beyond. With prices incredibly low for investors, the Pound may be in for brighter days.
On the 15 minute timeframe, the inverse head and shoulder is a lot more evident and we may have a potential long setup on our hands. Looking at fundamentals , the dollar is under immense pressure with multiple high impact events this week as well as the NFP data on Friday which may send the dollar tumbling. The FED also approved a $2 trillion stimulus package, so with the huge increase in currency circulation, the dollar should lose value.
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