Increasing volatility in financial markets

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The Market Watch review. 21.08.2020

In today's release, we’ll cover the following topics:

  • UK Retail Sales. (1)
  • Business activity in the Eurozone and Britain. (3)
  • Trade transaction analysis. (6)

With the opening of the European trading session, we received an unexpectedly strong report on the change in the volume of retail sales in Britain. The actual data significantly exceeded not only the previous, but also the predicted values. Nevertheless, we did not see a significant strengthening in GBP. Perhaps this is due to another scandal around the Brexit deal.

Thus, the demand for the currency pair in the first hours after the publication of the retail sales report remained very weak. As a result, the quotes of the pair resumed their decline to the psychological support level of 1.3200. But the development of a more powerful wave of decline is possible only if the USD strengthens noticeably.

We now turn to the publication of a comprehensive report on changes in the level of business activity for the manufacturing sector, as well as the service sector in the Eurozone. The actual data turned out to be worse than the previous values, with the predicted growth, which, of course, put pressure on the EUR. At the same time, it is important to take into account that all indicators remain above 50 points, thereby indicating a general growth in business activity, but the growth rate is lower than projected.

At the time of this release, the EUR/USD pair fell by more than 60 pips, returning below the important technical support level of 1.1850. At the same time, only a break of the support at 1.1800 will indicate the willingness of sellers to continue the decline to 1.1700. For this scenario to develop, a noticeable strengthening of the USD is required.

Moving to the American trading session, I would like to note the forthcoming publication of data on retail sales in Canada, as well as the PMI in the US manufacturing sector. It is unlikely that these publications will have a strong impact on the market, since the main fundamental factor remains the Fed's monetary policy. The absence of any hints of its tightening will leave USD under pressure from sellers.

I will conclude today's review by analyzing a 1 lot transaction to buy the GBP/USD currency pair. After a false breakdown of the support level 1.3080 and a return to this level, the trader opened a buy deal. Take Profit order was placed at the next resistance level 1.3215. The profit on this trade was $1350.

Closely monitor the news background and be prepared for all the surprises of the market.


Analyst

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