Price swings in the pound to dollar exchange rate have been unusually volatile as the pair makes sizable moves within a matter of hours comparable to what it typically does within a week.
In the last two weeks, the pair has dropped over 10% which exceeds the two week decline that followed the Brexit vote in June 2016. Further, the pair has declined to lows not seen in several decades.
Volatility is expected to continue later today as the US releases its latest unemployment claims figures. The report typically does not elicit much of a market response but today’s figures are expected to jump sharply higher.
Jobless claims in other countries have skyrocketed which is what has led analysts to set their aim for the largest number of weekly unemployment claims on record in the US.
The market reaction might be unpredictable. A weak report is generally bad for the dollar. But if the equity markets start to fall sharply on a bad report, the dollar could gain as it has been during bad times over the past few weeks.
To deal with unemployment issues in the UK, Chancellor Rishi Sunak is expected to announce new measures for self-employed workers. Sunak aims to have protection for self-employed workers and freelancers that is similar to the 80% wage compensation currently offered to other workers.
GBP/USD was last seen battling resistance at 1.1926 for a third time since initially testing the level on Friday.
The pair continues to look poised to break higher although today’s jobs report will likely play a big role in determining the direction from here.
A sustained break above 1.2000 shows the next upside target for the pair at 1.2200.
As mentioned, typical ranges for the pair are much larger than they normally were. Just yesterday, the pair declined almost 400 pips in the second half of the European session. The pair often doesn’t make moves that large in a week.
For this reason, traders should continue to exercise caution, and consider positioning much smaller than they normal would.
To the downside, support at 1.1653 held the decline yesterday and remains a critical floor for the session ahead.
- GBP/USD is once again near weekly highs and looks poised to break higher above the 1.2000 handle.
- The weekly US jobless claims figures are expected to drive unusual volatility to the markets today.
- Chancellor Sunak plans to unveil new stimulus measures aimed to protect the self-employed.
This article was originally posted on FX Empire
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