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The trading week is coming to an end, so it's time for us to summarize the preliminary results.
The movement along the trajectory of the sideways channel 1.3000 / 1.3185 has been held in the market for two weeks now, with which there were no significant changes except for a consolidation in the lower part of the channel. The market is currently in a kind of stabilization, but only with respect to the movement observed in July. With regards to the general price behavior, the pound remains overbought while the dollar remains oversold, in which even though the current flat has stabilized the market, the absence of a correction aggravates the situation, which may lead to a sharp collapse of the GBP / USD rate.
Thus, if we look at the market in terms of medium-term levels of interaction, we can deduce that the flat intersected with the previous one formed in the beginning of the year, during which a stop occurred, which led to a new downward move in the price chart. Although the situation now differs from that period of time, an unjustifiably inflated value of the pound can still provoke sharp changes in price.
In addition, the large sell-offs of the US dollar cannot last forever, as well as the disregard to the positive news in the United States. Sooner or later big players will take advantage of the situation, where we will finally see a sharp increase in the US dollar, possibly on a local basis.
In the meantime, looking at the M30 TF, we can see that the quotes formes a revered V-shaped pattern, where at first there was a splash of long positions, which brought the quote to a price level of 1.3122. Afterwards, a round of short positions appeared, which returned the quote to a price level of 1.3050.
Such gave a volatility of 95 points, the highest record since the beginning of the trading week. However, it is still below the average daily value - 110 - which suggests that activity slowed down due to uncertainty in the market caused by the absence of a correction.
Nonetheless, just as discussed in the previous review , traders continued to work on a breakout in the established boundaries, which is considered the most profitable strategy.
Meanwhile, the news published yesterday included data on the US labor market, where for the first time since March, initial claims for unemployment benefits fell below 1 million. All indicators came out better than what was expected, with initial applications falling from 1,191,000 to 963,000, lower than the forecast of 1 150,000. Repeated applications also decreased from 16,090,000 to 15,486,000, while the forecast was 15,800,000.
Market reaction to such positive data, although delayed for about two hours, increased the value of the US dollar in the market.
Today, data on US retail sales will be published, the forecast for which is an acceleration from 1.1% to 1.9%, which benefits the US economy.
The upcoming trading week promises several important macroeconomic reports, but the main event is the publication of the latest data in UK inflation, which may cause increased volatility in the market.
Tuesday, August 18
US 13:30 - Number of issued building permits (July)
US 13:30 - Volume of construction of new houses (July)
Wednesday, August 19
UK 07:00 - Inflation (July)
US 19:00 - Minutes of the FOMC meeting
Thursday, August 20
US 13:30 - Claims for unemployment benefits
Friday, August 21
UK 07:00 - Retail sales (July)
US 14:45 - Preliminary manufacturing PMI (Aug)
Further development
Analyzing the current trading chart, we can see that the quote fluctuated within the area of price levels 1.3045 / 1.3075, which can play into the hands of speculators working on local trading operations.
In such a case, the stagnation can be considered a temporary phenomenon, so it will probably break down today.
Hence:
- Buy positions higher than 1.3085, in the direction of price levels 1.3100-1.3120.
- Sell positions lower than 1.3045, in the direction of price levels 1.3015-1.3000.
Just as before, the main strategy is to breakout from the established boundaries of the 1.3000 / 1.3185 flat, the success of which will indicate the further direction of the pair in the market.
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that the indicators in the minute period changed signal into neutral, mainly due to the current stagnation of quotes. The hourly period, on the other hand, is still on the verge of changing signals, while the daily period, as before, signals buy due to the general market dynamics.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The measurement of volatility reflects the average daily fluctuations, calculated per Month / Quarter / Year.
(August 14's was built, taking into account the time this article is published)
Volatility is currently 26 points, which is 76% lower than the average daily value. Such dynamics is considered critically low, and signals an upcoming acceleration. Perhaps, the breakout of the range 1.3045 / 1.3075 will provoke speculators to take action.
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
Also check the trading recommendations for the EUR/USD pair here, or the brief trading recommendations for the EUR / USD and GBP/USD pairs here.
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