The pound/dollar currency pair strictly follows within the sideways channel 1.3000 / 1.3185, showing suspiciously low dynamics. The renewal of the minimum on August 7 (1.3008) did not lead to anything necessary, while the area of the psychological level 1.3000, which simultaneously plays the role of the lower border of the flat, cut the volume of short positions, which led to a stagnation and a rebound of the price in the opposite direction.
The high value of the pound is no longer something extraordinary, possibly due to the fact that the inertial move that took place in July is considered complete, and the current flat partially normalizes the emotional component of the market. It all depends on the point of view of looking at the market: if we proceed from the global sales of the US dollar in the currency market, then the level of the pound sterling is adequate. If analyzed from the point of view of the pound as a stable currency and a prosperous British economy, the opposite is true, the exchange rate is overvalued, and a small change in the mood of speculators is enough to provoke a collapse.
This is such a difficult situation for traders, where it is enough to switch to the daily chart to see that the existing flat is 70% of versatile Doji candles, which is considered a signal of great uncertainty.
Analyzing the last trading day by the minute, you can see a variable zigzag fluctuation 1.3004/1.3065 throughout the day, where the quote conditionally stood in one place.
In terms of daily volatility, the lowest indicator for 18 trading days is recorded - 62 points, which is 43% lower than the average daily level of 110 ---> 62 points. A sharp slowdown in dynamics has been observed since the beginning of the trading week, which may signal a high level of willingness of speculators to price changes.
As discussed in the previous review, traders consider the breakdown of the flat boundaries as the main strategy, but as long as the price is within the specified frames, local positions using the rebound method are not excluded.
The news background of the past day included data on the UK GDP for the second quarter, which recorded a decline of 21.7% in annual terms, and by 20.4% in quarterly terms. In fact, London has officially announced that the country has fallen into recession, defined as two consecutive quarters of recession. A similar phenomenon occurred at the time of the 2008-2009 economic crisis.
In turn, Rishi Sunak, Chancellor of the British Treasury, during an interview with the BBC, announced a new wave of job losses, as well as a strong decline in retail sales and the purchasing power of the country's citizens.
"A few months ago I talked about tough times coming, new evidence suggests that these times have come," Sunak said.
In the afternoon, the data on inflation in the United States for July was published, where they record an increase of up to 1% in annual terms, while they predicted an increase to 0.8%. On a monthly basis, the figure was confirmed at 0.6%, as in June.
Inflation is growing at the fastest pace, which has a positive effect on the economy of the United States, but the dollar has not yet entered the stage of strengthening, which indicates a factor in keeping global sales down.
The pound sterling is walking on the edge, investors will wake up sooner or later and here there will be a collapse in its value with such a sharp divergence of macroeconomic indicators.
Today, in terms of the economic calendar, we have weekly data on unemployment claims in the United States, which is forecast to decline. Initial claims could decline from 1,186,000 to 1,150,000, and re-claims could drop from 16,107,000 to 15,800,000.
There is a signal in favor of the strengthening of the US dollar once again, but if we proceed from the restraint of investors regarding the dollar, then we can see another discrepancy between fundamental analysis and the life of the market.
Further development
Analyzing the current trading chart, an attempt to build an upward move towards the average level of the sideways channel 1.3085 can be seen, but the activity slowed down again. The movement along the rising course of the channel will be most relevant if the price consolidates above 1.3090/1.3100. Otherwise, the previously set amplitude of 1.3000/1.3085 will hold out for some time.
Primary changes in the tick can occur only in case of breakdown of one or another border of the side channel 1.3000/1.3185.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on minute intervals signal a sale due to the price rebound from the average level of the channel. Meanwhile, hourly periods have a neutral signal, but in case of a consolidation or rebound from the level of 1.3085, the direction will be assigned. The daily period, as before, signals a buy, focusing on the general dynamics, but if the price consolidates below 1.2985, the signal will change to sell.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(August 13 was built taking into account the publication time of the article)
The volatility of the current time is 53 points, which is 51% below the daily average. It all depends on how the quote will behave. If there is a price consolidation above 1.3090 / 1.3100 or a breakdown of the 1.3000 level, there will be a jump in activity. Otherwise, the dynamics will be below average.
Key levels
Resistance zones: 1.3200 (1.3250) **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 1.3000; 1.2885 *; 1.2770 **; 1.2620; 1.2500; 1.2350 **; 1.2250; 1.2150 **; 1.2000 *** (1.1957); 1.1850; 1.1660; 1.1450 (1.1411); 1.1300; 1.1000; 1.0800; 1.0500; 1.0000.
* Periodic level
** Range level
*** Psychological level