All hell broke loose ahead of Japan's opening, as the pound collapsed.
The pound/dollar pair went from 1.26 to 1.19 and back to 1.24 in a matter of minutes, and the market is still looking for an explanation for the move. Most talk about algos reacting to French President Francois Hollande, who said if the U.K. wants a hard Brexit, it will get it. A fat finger is another possibility, although the only known fact is that the pound plunged by hundreds of pips against all of its rivals.
Data coming from the U.K. did little to help the pound recovering, as manufacturing and industrial production fell in August, according to official figures. Total production output was estimated to have increased by 0.7% compared with August 2015 but fell by 0.4% when compared to July. Manufacturing increased by 0.5% from a year before and by 0.2% on a month-on-month basis.
Also, the trade balance showed that the U.K.'s deficit on trade in goods and services was estimated to have been 4.7 billion pounds in August 2016, a widening of 2.5 billion pounds from July 2016. And bad news keeps coming from the pound.
Ahead of the release of the U.S. Nonfarm Payroll report, expected to be generally better than the August one, the pound/dollar pair is extending its slide, down from 1.2476 to the 1.2380 level. Technical indicators are quite distorted after the mentioned slump, but the bearish momentum is undeniable, and the pair is poised to extend its decline, with a break below 1.2350 now exposing the 1.2300 region, en route to 1.2240/60.
Recoveries up to 1.2500 will be now seen as selling opportunities, although a recovery above the level can see the pair correcting up to the 1.2600/20 price zone, the pre-collapse levels.
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