Hello volatility my old friend: GBP/USD, EUR/GBP,USD/CHF

Regardless of the reason, volatility is back.

FOREX 3

There is a new strain of the coronavirus.  Flights are being shut down to and from the UK  and the rest of the world.  The US is about to sign a $900 billion US emergency fiscal aid package.  Brexit is going to be agreed on soon.  Brexit is not going to be agreed on by December 31st.  President Trump is still vowing to win the US election.  There is light volume is the markets due to end of year.  There is more stimulus to come.  China! Whatever the reason, volatility has picked up today and it may continue to be here through year end!

GBP/USD

GBP/USD has bene trading in a megaphone pattern since November 23rd.  A megaphone pattern is a broadening pattern, in which price forms higher highs and lower lows, thus creating volatility.  On Friday, GBP/USD traded above 1.3600 and closed near 1.3500.  On Monday, price gapped over 100 pips lower and traded down to as lows as 1.3188 (a 2-day range of over 400 pips!) before reversing.  Simple Fibonacci analysis from Friday’s highs to today’s lows shows that price retraced to the 38.2 Fibonacci line near 1.3350.  1.3404 is the 50% retracement level and 1.3484 will fill the weekend gap. First support is at today’s lows, then horizontal support at 1.3134 and then the downward sloping trendline from the megaphone pattern near 1.3088.

Source: Tradingview, City Index

EUR/GBP

EUR/GBP has been trading in a symmetrical triangle since March 19th.   After trading just below the triangle for much of November, the pair rallied back into it and has been trading erratically near the apex.  One thing is for sure…traders do not like EUR/GBP above 0.9200!  On both December 10th and today, the pair rallied above the downward sloping trendline of the triangle and sold off back into the triangle.  Gap support from the open is at 0.9084.  Thursday’s lows are at 0.8981 and horizontal support is at 0.8918.  Resistance above is at today’s highs of 0.9217, then December 10th highs of 0.9230.  Above there are the September 11th highs of 0.9292 and then the March 19th highs at 0.9500.

Source: Tradingview, City Index

USD/CHF

USD/CHF is sometimes used as a proxy for the US Dollar Index because of their correlation.  On a 120-minute timeframe, the current correlation coefficient between USD/CHF and DXY is .91.  A correlation coefficient of +1.00 would mean that the two assets move together on a one for one basis. USD/CHF broke lower below support on December 2nd and has been trading in an orderly downward sloping channel since.  Today, price tried to aggressively push the upper trendline of the channel.  USD/CHF traded erratically between 0.8842 and 0.8919, before forming a shooting star and pulling back into the channel.  The RSI had been diverging from price since early December and finally moved higher today (only to sell off again.).  Resistance is at today’s highs near 0.8918, then not until the December 2nd breakdown point near 0.8980.  Support is at Thursday’s lows of 0.8822, then the bottom trendline of the channel near 0.8800. 

Source: Tradingview, City Index

Regardless of the reason, volatility is back.  Traders love volatility as it gives them more opportunities to make money.  However, volatility can also bring quick losses.  Trade smaller and make sure to use proper risk/reward in wide ranging, volatile days.

Learn more about forex trading opportunities.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.