The pound/dollar currency pair, moving along a downward course, found a foothold in the level of 1.3240, where a pullback was formed, followed by stagnation at 1.3240/1.3300 coordinates. The lack of proper recovery of long positions indicates that sellers still have a chance, but in order to move to a new level of decline, the quote must complete the current phase of stagnation and consolidate below 1.3240.
Considering all possible theories of market development, we can see that the assumption of a market reversal is gaining impulse, which comes from the regularity of the area of 1.3300/1.3500, where the history of 2018, 2019 and 2020 has repeatedly experienced a price rebound in the opposite direction.
The current situation indicates the control touch of the interaction area, which can pull both speculators and trading volumes.
At the same time, if you do not think according to a pattern, then it is suggested to play it safe and leave some trading volume for the alternative development of the market, out of sight of the pattern. It means that the market is now at an extremely unstable emotional level and it is not entirely appropriate to compare the pattern of 2018 and 2019. What happens if the speculators get out of control? The answer is simple - the local high (1.3513) of 2019 will fall, and then there will be impulses on which you can quickly earn profit. Based on this, I advise you to save a certain amount of volume for extraordinary transactions.
Analyzing the last trading day by the minute, you can see that the turn of short positions in the period 9:00-11:00 UTC+00, followed by a pullback with the accumulation process, which may signal an upcoming acceleration in the market.
In terms of daily dynamics, an acceleration has been recorded for the third day in a row, where the indicator does not fall below 100 points, which signals a speculative excitement in the market.
As discussed in the previous review, traders assumed that price consolidating below 1.3270 would activate short positions, leading to a further decline towards 1.3200. Meanwhile, the stagnation turned out to be more significant than expected, the quote renewed the local lows for the week, but the concentration remained within the level of 1.3300.
Considering the trading chart in general terms (daily period), we can see that the quote is still at a conditional peak, and if viewed in terms of the overbought pound, then sellers still have chances for a more significant decline.
The news background of the past day included data on claims for unemployment benefits in the United States, which came out much better than the forecast. So, the initial applications declined by 130 thousand, after passing the psychological threshold of 1 million (1.011 million ---> 881 thousand). The number of repeated applications for benefits also surpassed all forecasts, a decrease of 1.668 million, which was positive news for investors.
In terms of the economic calendar, perhaps one of the most important events of the week is the report of the US Department of Labor, which is very important for the economy of the US. After all, if the labor market continues to confidently recover, then it will inevitably pull the entire economy along with it. The forecasts are quite optimistic, as the unemployment rate should decline from 10.2% to 9.9%, and 1,490,000 new jobs could be created outside agriculture. All this indicates a gradual stabilization of the economic situation, which will please investors and indicate the strengthening of the dollar.
The upcoming trading week will be allocated for the pound only, since we have a lot of statistics only at the end of the week. At the same time, trade negotiations between England and Brussels should be noted, which may give speculators new leverage for action, and it is also worth listening to the ECB meeting, which may indirectly affect the pound in the form of a correlation.
Monday, September 7
USA - Labor Day (Weekend)
Thursday, September 10
ECB meeting - 11:45 Universal time
USA 12:30 Universal time - Claims for unemployment benefits
Friday, September 11
Great Britain 06:00 Universal time - Volume of industrial production for July
Great Britain 06:00 Universal time - GDP (m/m)
UK 06:00 Universal time - July's construction volume
USA 12:30 Universal time - Inflation for August
Further development
Analyzing the current trading chart, a variable price fluctuation within 1.3240/1.3295 can be seen, where market participants seem to be preparing for new market surge. Now, if we consider the current news background, it can be assumed that the stagnation will end today, where it was logical to see a downward development amid a strong overbought pound and an oversold US dollar.
Based on the above information, we will display trading recommendations:
- Consider sell deals below 1.3240, with the prospect of moving to 1.3200-1.3180-1.3050.
- Consider buy deals as alternative positions, if the market mood changes sharply and the quote manages to consolidate above 1.3325, with the prospect of moving to 1.3350-1.3380.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on the minute and hourly periods signal a sell, but the signal is variable, due to movement within the boundaries of stagnation. In turn, the daily period signals a buy due to the general direction of the market.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The volatility measurement reflects the average daily fluctuations, calculated per Month / Quarter / Year.
(It was built considering the publication time of the article)
The volatility of the current time is 41 points, which is 64% below the average. The deceleration process indicates a possible surge in activity, possibly amid the news flow and speculative excitement.
Key levels
Resistance zones: 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 1.3300 **; 1.3200; 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).
* Periodic level
** Range level
*** Psychological level