The price of pound crashed to less than 1.2000 on Friday during the Asian session in an unprecedented fall, marking the biggest plunge since Brexit. The currency,however, recovered sharply most of its ground as buyers took control near the historic low. The technical bias remains extremely bearish because of a Lower Low on all timeframes.
As of this writing, the pair is being traded near 1.2438. A support may be noted around 1.1916, the intraday low of today ahead of 1.1900, the psychological level and then 1.0000, the parity level.
On the upside, the pair is expected to face a hurdle around 1.2622, the intraday high of today ahead of 1.2759, the high of yesterday and then the 1.2789-1.2869 region, which is a key horizontal resistance area as demonstrated in the above daily chart. The technical bias will remain bearish as long as the 1.3444 resistance area is intact.
What Caused This Plunge?
The pound plunged as much as 6.1 percent against the dollar, the biggest decline since the day the U.K.’s Brexit referendum result was announced, in a move that traders said was exacerbated by computer-initiated sell orders. Some traders saw the possibility of human error, or a so-called “fat finger,” with algorithms adding to selling pressure at the time when liquidity is typically low. Others pointed to the Financial Times article citing French President Francois Hollande as saying the U.K. must suffer the consequences of leaving the European Union.
Considering the overall technical and fundamental outlook, buying the pair could be a good option if we get a giant bullish candle on the daily chart today.