GBP/USD – Pound Slide Continues as Markets Jittery After Flash Crash

GBP/USD has resumed its downward slide on Monday. The pair has posted considerable losses and is trading at the 1.24 line in the North American session. On the release front, it’s a very quiet start to the week, as US markets are closed for Columbus Day. In the UK, the sole event on the schedule is British BRC Retail Sales Monitor.

The pound suffered a “flash crash” on Friday, as GBP/USD lost six percent of its value in less than two minutes at the start of the Asian session. There are various theories about the cause of the plunge, including algorithms and human error. The currency dropped below the 1.20 line before recovering to close the Friday session at 1.2380. It marked the end of a miserable week for the pound, which lost 500 points. Although recent British numbers have been better than expected, this has not improved market sentiment toward the pound. There are persistent concerns that the government may opt for a “hard Brexit”, which would see Britain adopt its own immigration rules but lose its unrestricted access to EU markets. This could lead to serious economic consequences for Britain and send the shaky pound further downwards.

The US released eagerly-awaited employment numbers for September on Friday, and the data was mixed. Nonfarm payrolls, one of the most closely watched indicators, rose slightly to 156 thousand. Although this was well short of the forecast of 171 thousand, the markets do not appear overly concerned, as other employment indicators were steady. Average Hourly Wages edged up to 0.2%, matching the forecast. The unemployment edged up to 5.0%, just above the forecast of 4.9%. As well, the labor force participation rate ticked higher. Unemployment claims sparkled last week, dropping to just 249 thousand, beating the estimate of 255 thousand. Unemployment claims have come in below the forecast for 10 straight weeks, pointing to a tight labor market. Jobless filings have been below 300,000 for 83 straight weeks, marking the longest streak since 1970. Overall, September employment numbers were decent and the likelihood of  December rate has actually risen slightly since Friday, from 63 percent to 66 percent.

GBP/USD Fundamentals

Monday (October 10)

  • 19:01 British BRC Retail Sales Monitor

*All release times are EDT

* Key events are in bold

GBP/USD for Monday, October 10, 2016

GBP/USD October 10 at 11:20 EDT

Open: 1.2434 High: 1.2444 Low: 1.2353 Close: 1.2396

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.1844 1.1954 1.2120 1.2447 1.2525 1.2612
  • GBP/USD has shown limited movement for most of the Monday session
  • 1.2120 is providing support
  • 1.2447 is a weak resistance line

Further levels in both directions:

  • Below: 1.2120, 1.1954 and 1.1844
  • Above: 1.2447, 1.2525 and 1.2612
  • Current range: 1.2120 to 1.2447

OANDA’s Open Positions Ratio

GBP/USD ratio posted sharp gains in short positions after the pound recorded sharp losses on Friday. Currently, long positions still have a majority (57%). This is indicative of trader bias towards GBP/USD reversing directions and moving to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.