The GBP/USD currency pair did not manage to stay above the sideways channel 1.3000/1.3185, after a short price fluctuation in the range of 1.3230/1.3265. A sharp reversal occurred, which returned us to the previously passed flat.
If we proceed from the pattern of fluctuations in the past, then the current price development is confirmed for the periods of December 2019; January-February 2020. In these periods, on a systematic basis, the quote found resistance in the area of 1.3200-1.3250, where the maximum deviation was the level of 1.3300, which plays the role of the upper border of the medium-term price range 1.2770 // 1.3000 / / 1.3300.
At the same time, all market participants felt the high oversold level of the US dollar, which made the structure of the upward movement unstable and subject to technical and speculative impact.
Regarding the theory of market development, a lot depends on the sales of the American US dollar, since if this factor disappears, the pound sterling will drop to the May-June region, and even at these levels, the value of the British currency will be considered high in a long-term consideration of the economic situation in Britain.
Analyzing the last trading day by the minute, we can see that a round of short positions arose at 9:30 UTC+00 and lasted literally until the end of the trading day at 00:00 hours at the trading terminal. The minimum level for a downward trend is 1.3099.
In terms of daily dynamics, the highest volatility indicator for 48 trading days is recorded, it amounted to 173 points, which is 54% higher than the average level. Acceleration of the market dynamics was expected due to technical factors: weekly slowdown; a series of two-digit Doji candles on a daily period.
As discussed in the previous review, traders considered two scenarios at once: upward and downward development. The process of price deceleration in the 1.3230/1.3265 amplitude came to support a trading decision, where market participants worked on the principle of breaking through the established boundaries, which definitely brought an impressive profit.
Considering the trading chart in general terms (daily period), we should pay attention to the period of the beginning of the current move. It is not worth expecting a similar repetition, but the interaction of trading forces in the 1.3200 .3300 area may lead to an impressive correction in the market.
The news background of the past day included data on inflation in the United Kingdom, which rose in July to the highest level since March, which was facilitated by the rise in prices for goods for leisure and recreation, clothing, fuel and household goods.
Inflation accelerated from 0.6% to 1.0%, in annual terms and from 0.1% to 0.4% in monthly terms.
There was no market reaction to the statistics, possibly due to the heavily overbought pound.
The minutes of the meeting of the Open Market Operations Committee (FOMC) of the United States Federal Reserve System was published in the evening, where the participants of the meeting expressed the opinion that the American economy is likely to need additional support, but did not decide when they should start using new tools.
The economic support factor had an impact on the US dollar, which, after the publication of the minutes, continued to strengthen in value against all currencies.
Today, in terms of the economic calendar, we have weekly data on the United States labor market, which will publish figures on the number of applications for unemployment benefits.
The number of repeated applications for unemployment benefits may be reduced by 486 thousand, from 15 486 000 to 15 000 000.
Initial claims for unemployment benefits may be reduced by 38 thousand, from 963,000 to 925,000.
The factor of gradual recovery in the US labor market may support the US dollar in case of coincidence of expectations or the best results.
It should be noted that the dollar has been ignoring fundamental analysis lately.
Further development
Analyzing the current trading chart, we can see the weakening of the pound sterling by almost 200 points in 23 hours, which can provoke a local overheating of short positions and, as a result, a technical pullback. The decline to the level of 1.3060 coincides with the slowdown area in the August 17 period, where fixing of short positions may occur and, as a result, a pullback towards 1.3120.
A further downward movement will be considered in case of price consolidation below 1.3050, with the prospect of a move to the 1.2985/1.3000 area.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on the minute and hourly intervals signal a sell due to a rapid downward movement. Amid a sharp change in the exchange rate of the pound sterling, the daily period was hit, which locally changed the signal from buy to sell, the signal is still of a variable nature.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The volatility measurement reflects the average daily fluctuations, calculated per Month / Quarter / Year.
(August 20 was built considering the time of publication of the article)
The volatility of the current time is 54 points, which is 51% below the daily average. Two days of acceleration can locally overheat the market, thus, if speculators do not continue to manipulate, then it should not be ruled out that Thursday will have dynamics below the average level.
Key levels
Resistance zones: 1.3200; 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
