GBP/USD analysis: total collapse didn't take too long

Valeria Bednarik FXStreet

GBP/USD Current price: 1.2377

Pound's collapse continued this Thursday, with the GBP/USD pair sinking to fresh 31-year lows of 1.2601, and shedding additional 400 pips or a whopping 5% early Asia, in a matter of minutes. Ahead of the Nikkei opening, the pair is trading with a 10 pips spread of more, and with charts showing lows below 1.2000 but with no clear consensus over what triggered the slide, neither which was the actual low of such wild 5-minutes move. This kind of sharp moves in an extremely bearish, sentiment-driven market, are usually the beginning of the end of such dominant trend, but it may not be the case this time, given that political uncertainty and economic deterioration, will only worsen from here.

The FTSE 100 soared on a cheaper currency, as most of the listed companies get their incomes from abroad. What speculative interest forgot, is that those companies also have to buy their producer materials abroad, and are clearly more expensive. Easyjet was the first to lift a red flag, warning that the weak pound would cost the company £90m this financial year, with shares closing the day 6.93% lower.

The pair quickly bounced back to around 1.2400, and technical readings are currently extremely distorted by the sharp decline, as indicators in almost every intraday timeframe maintain sharp bearish slopes within extreme oversold levels. Still, as long as below 1.2500 the risk will remain towards the downside, whilst above this level, the pair can quickly recover up to 1.2600. More wild swings should be expected for the upcoming sessions, with investors now waiting for a positive US Payroll to resume selling at whatever level the pair stands by then.

Support levels: 1.2340 1.2290 1.2250

Resistance levels: 1.2420 1.2460 1.2510

View Live Chart for the GBP/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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