Technical Analysis: GBPUSD WEEKLY ANALYSIS – POUND MAJOR PLUNGE TOPS BREXIT CRISIS

GBPUSD WEEKLY ANALYSIS – POUND MAJOR PLUNGE TOPS BREXIT
CRISIS 

Following the previous report on GBP/USD, the pair disobeyed all its
technical rules, breaking below all its previous support levels to reach its
lowest level last seen since 1985 near 1.1400 handle. The plunge in prices was
even further than the major plunge experienced in 2016 during the announcement
of Brexit. Current price action in the weekly chart is testing back the support
formed in 2016 near 1.1600 whereby a breakout would suggests further downward
pressure. 

In terms of MACD, the bearish momentum now expanding, supported by
previous death cross formation in both the MACD and its 18EMA & 50EMA. If
the pair fails to break below its support level, strong correction can be
expected in the near term. However, in a situation near financial crisis or
global recession, technical analysis based on lagging indicators are easily
distorted and easily ignored by the market.  

From the fundamental point of view, the major plunge came amid the
Covid-19 pandemic, which sent investors fleeing from stocks, energy and risky
markets into safe-haven dollar. The strength of the dollar caused major
sell-off in the euro and the pound, where the pair GBP/USD throughout this week
recorded up to a 1000 pips movement. However, the pair managed to pared part of
its losses after the Bank of England (BoE) called for another emergency rate
cut from 0.25% to 0.10%, in efforts to bolster the downfall in economy caused
by the virus.   

However, UK government faces backlash when discussing about their
efforts to tackle the virus, which fall short comparing against other countries
who are already entering lockdown mode. Number of cases in the UK continues to
spike gradually, with a total of more than 3000 affected cases and more than
600 deaths since the outbreak of the virus, according to statistics.

Times like this are difficult for everyone around the world, as
humans for once isn’t fighting among themselves, but against a pandemic feared
by all. Central banks and governments are also under pressure to come up with
stimulus and plans to save their people and their economy. Thus with current
market condition, we can expect investors to continue seeking shelter in the
dollar market until a possible cure or vaccine is found. 

Regain Capital wishes to remind all readers to wash their hands more
frequently, drinking sufficient amount of water and keep social distancing as
cases like this are critical and unpredictable.