It seems to have happened. Although not a correction, at least we witnessed a rebound. Moreover, the economic reports from the US, which had consistently supported the dollar's strength, did not have any impact this time around. After all, data revealed that GDP expanded at an unrevised annualized rate of 2.1% during the second quarter, which was significantly better than preliminary estimates. The number of unemployment claims remained almost unchanged. In the last couple of days, similar data only exacerbated the dollar's overbought condition. But it seems that the market has finally reached a certain point beyond which it was no longer possible to go lower. And regardless of everything, the dollar started to actively lose its positions. Moreover, this started even before the release of US data.
And it is quite possible that this technical rebound is just preparation for today's flash version of the Eurozone Consumer Price Index. The report is expected to show that the CPI moderated from 5.3% to 4.8%. There are assumptions that inflation will decrease even more. This means that the European Central Bank will begin to lower interest rates in the near future, possibly even without another rate hike, as was previously assumed. All of this paves the way for the dollar to rise further. And if forecasts are confirmed, the market will quickly return to the values it had at the beginning of Thursday. And then it will go further. However, yesterday's rebound has yet to rectify the dollar's overbought condition, which means there is still a risk of a sudden correction.
Although the pound consolidated below the 1.2150 level, the overbought status has done its job. A technical rebound has taken place and the British currency has recovered by almost 1%, which is about 100 pips.
The RSI technical instrument shows that a critical oversold level was observed for some time on the 4-hour chart.
Meanwhile, the Alligator's MAs are intertwined in the 4-hour chart as a result of the current rebound.
OutlookThe oversold status has been lifted from the intraday period, as market participants reposition ahead of a new downward movement. However, we expect an increase in short positions after the price returns below the 1.2150 level. Until then, a rebound-correction will persist in the market, which allows the pound to rise further.
Complex indicator analysis indicates points to the current rebound in the short term and intraday periods. Indicators also signal a downtrend in the medium term.