Brexit
Among the majors, GBPUSD has one of the biggest losses in yesterday’s trading. The currency pair was down 356 pips from its intraday high of 1.2848 and bottomed at 1.2489. By the end of the New York session, it sustained a 252-pip loss at 1.2568.
Risk aversion dominated market sentiment yesterday as WHO raised its alert for the coronavirus, declaring it as a pandemic. In reaction, the Federal Reserve and ECB injected their economies with cash through asset purchase programs. However, it did not seem to soothe market concerns.
It also did not help that UK Prime Minister Boris Johnson warned that “many more families will lose their loved ones before their time.” He said this is a press conference where he declared that the government will be moving to the next phase of its plan which is to delay the spread of the coronavirus. With it, he announced that people feeling ill must self-isolate themselves for at least 7 days.
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The 15-minute chart of GBPUSD suggests that there is more downside potential for the currency pair. After a sharp drop yesterday, it has consolidated by making higher lows and lower highs. Consequently, a bearish pennant has materialized. A close below yesterday’s low at 1.2489 could suggest that there are enough sellers left in the market to push price lower. If this happens, we could see GBPUSD drop to its October 2019 lows at 1.2187.
On the other hand, the 1-hour chart shows that the currency pair has room to trade higher and still maintain its downtrend. By connecting the highs of March 9, March 10, and March 11, it can be seen that there is trend line resistance around 1.2730. This price also coincides with the 50% Fib level when you draw from the high of March 11 to the low of March 12.