FX.co ★ Unjustified expectations of traders on EUR/USD and GBP/USD

Just last trading week, we said that the prospects for the exit of Europe and Britain from the coronavirus crisis are considered depressing, and now we have news that the United Kingdom is partially lifting the restrictive measures imposed on its citizens due to the pandemic.

The lifting of sanitary measures starts to take effect today, March 29, which includes the abolition of the general call to stay at home, opening up the possibility of group meetings on the street of no more than six people or members of no more than two households. Also, citizens will be able to resume outdoor group sports, tennis courts and golf courses, football and cricket will open.

Taking into account the introduced indulgences, the UK government hopes on the responsibility of its own citizens, since the situation concerning the loading of hospitals and the growth of new cases could change dramatically if basic sanitary measures are not followed.

Subsequent stages of lifting restrictive measures: April 12, May 17, and June 21.

How wonderful it is that everything will eventually normalize, but it is worth recalling that initially, the British government considered normalization already from the beginning of spring, and by the beginning of summer, the full launch of all lagging business areas.

However, the government's expectations about taking control of the coronavirus were not met, and the economy is going into a second round of decline-stagnation.

According to Oliver Dowden, Secretary of State for Digital, Culture, Media and Sport of Great Britain, citizens wishing to relax abroad will probably not be able to do so until August.

Let me remind you that British citizens are forbidden to travel without a good reason, violators may face a fine of £5,000. This will take effect from March 29 until June 30.

Currently, only a few are permitted to leave the United Kingdom. This particularly applies for work, for educational purposes, for attending weddings and funerals, as well as for exceptional personal reasons.

As for those entering the UK, upon arrival, they are obliged to 10 days of self-isolation and two tests at their own expense, which will cost £210. After that, visitors must follow the restrictive regime in force in the country.

Given the unfavorable situation, the tourism sector and the directions associated with it will continue to go bankrupt and put pressure on the country's economy.

In turn, Europe cannot boast of the UK's success in easing restrictive measures, since at this time there is an active fight against the third wave of coronavirus, where many countries of the Euro bloc have already extended the lockdown until mid-April.

What is happening in the market in terms of technical analysis?

Let's start with the analysis of the euro against the dollar, where during the last trading week, the quotes updated the local minimum of the correction course from the peak of the medium-term trend 1,2349 /--->//1,1835//--->/1,1761. The scale of the euro's weakening since the beginning of the year is 4.73%, which is about 580 points, which is not small, but if we recall the size of the medium-term upward trend, everything will fall into place.

Coordinates 1.1761 serve as a pivot point variable, which will be broken by market participants soon. This situation with an oblong correction suggests that sellers are trying to change the medium-term trend using the example of 2018, but it is not worth making hasty conclusions, first sellers need to lower the euro rate to the 1.1650 mark, then this theory will have a clear foundation and followers.

The sterling, with which we started the review, follows in the structure of the corrective movement from the peak of the medium-term trend at 1.4224, where sellers managed to update the local minimum of 1.3835 and designate a new periodic support in the form of the coordinate 1.3669.

The scale of the weakening of the pound sterling is 4%, even though the correction came a month later than in the euro. The volume of the decline is not large enough to designate oversold status or to speak of a change in trading interests, but sellers still have an opportunity to prove themselves.

Expectations and prospects

The information flow regarding the coronavirus will still put pressure on speculators, so you should keep track of the hot topics related to easing and tightening of restrictive measures, as this directly affects the medium-term outlook for the economy.

As for the economic calendar, data on the UK lending market was published today, where, instead of a complete defeat, market participants managed to speculate quite well. So, we expected a decline in all areas of lending, but instead, the volume of mortgage lending in February rose from £5.17 billion to £6.20 billion, and the volume of consumer lending fell slightly less than forecast, which also cheered traders.

Naturally, this is a local interest, and it is called speculative, but still, the pound sterling has strengthened in value by about 70 points.

Europe and the United States cannot boast of statistics today, the economic calendar is empty.

Trading observations and recommendations

For more than 40 hours, the euro has been following within the range of 1.1761/1.1804, which suggests an accumulation process, and this can be used by speculators. If we take into account the fact that even taking into account the active downward movement, buyers cannot increase the volume of long positions within the framework of stagnation, then why should sellers not renew the local minimum of the correction again.

In this situation, you should not rush and it is better to wait for the price to stay below 1.1760, which may well open the way in the direction of the main pivot point 1.1650.

If you consider yourself a speculator, then along the way you can consider the strategy of a local surge in activity relative to the worked-out range of 1.1761/1.1804. In this case, work is done immediately on both sides, on the outgoing impulse. The strategy is considered short-term.

What happens on the EUR/USD chart in terms of indicator analysis and market dynamics?

Analyzing different sectors of time frames, we see that technical instruments on the minute, hourly, and daily time frames signal a sell due to the accumulative process within the base of the corrective move.

In terms of market dynamics, a sharp decline in daily volatility by about 50% is recorded, which indicates the accumulation process and a possible acceleration in the market. The coefficient of speculative transactions moved to growth.

The sterling managed to accelerate during the beginning of the European session, and this is the reason for the information flow. The downward interest in the form of the volume of the corrective move from the peak of the trend affects the quotes and market participants, so one should not exclude the possible prolongation of the downward move from consideration. Coordinates 1.3850 and 1.3880 are considered as resistance levels against which the volume of short positions can build up.

In case of confirmation of the theory regarding the downward movement, we can see movement in the direction of 1.3750-1.3680 in the coming days.

What is happening on the GBP/USD chart in terms of indicator analysis and market dynamics?

Analyzing different sectors of time frames, we see that technical instruments on the minute and hour periods signal a buy due to the rollback stage from the 1.3669 variable pivot point. The daily period, as before, is focused on selling, referring to the corrective move from the peak of the medium-term trend.

In terms of market dynamics, a slight slowdown of about 20% relative to the average level is recorded, but if you look at short-term periods, you will see active speculative interest.