USDGBP closes below its opening price unable to hold early session gains
US Dollar/British Pound (USDGBP) Technical Analysis Report for Feb 14, 2020 | by Techniquant Editorial Team
Moving lower for the 5th day in a row, USDGBP finished the week -1.22% lower at 0.7665 after edging lower 1 pip (-0.01%) today. Trading 24 pips higher after the open, the currency was unable to hold its gains as the bears took control ending the day below its opening price. Closing within the previous day's range, prices failed to decisively move beyond the prior day's trading range in a lackluster session.
Daily Candlestick Chart (USDGBP as at Feb 14, 2020):
Friday's trading range has been 37 pips (0.48%), that's below the last trading month's daily average range of 54 pips. Weekly volatility is also lower, being slightly below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for USDGBP.
During the whole day, prices traded within the previous day's range, unable to trade above the prior day's high or below the previous day's low forming an Inside Bar. Additionally, one bearish candlestick pattern matches today's price action, the Bearish Spinning Top. The last time a Bearish Spinning Top showed up on December 24, 2019, USDGBP lost -0.39% on the following trading day.
After trading down to 0.7655 earlier during the day, the forex pair bounced off the key technical support level at 0.7662 (S1). The failure to close below the support might increase that levels significance as support going forward. After having been unable to move lower than 0.7651 in the prior session, the pair found buyers again around the same price level today at 0.7655.
Though still in a long-term downtrend, the short and medium-term trends both turned bullish already.
Selling could accelerate should prices move below the nearby swing low at 0.7651 where further sell stops might get activated. As prices are trading close to February's low at 0.7585, downside momentum could speed up should USD/GBP mark new lows for the month.
Among the six market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "5 Consecutive Lower Closes" stand out. Although it is usually interpreted as bearish, it has actually shown to be bullish for USD/GBP. Out of 34 times, USDGBP closed higher 58.82% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 52.94% with an average market move of 0.23%.