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The GBP / USD pair managed to overcome the local low of 1.2916 yesterday, which opened the way to the next price coordinate 1.2860, where a regular stop was observed at the beginning of the month, followed by a rebound in price.
If we pay attention to the recovery process relative to the four-week upward trend (from 1.2674 to 1.3175), we will see that on October 21-29, the bears managed to restore the downward movement by about 57%, which can be considered a sell signal. The main volume of short positions will appear after a consolidation below 1.2840, which may lead to a 100% recovery of the September cycle.
So, if we analyze the trades setup yesterday by minutes, we will see that the wave of short positions arose from 09:45 and lasted until 15:30, during which the quote reached the level of 1.2880. After that, the pair underwent a pullback and moved from 1.2880 to 1.2935, and then to a sideways move 1.2915 / 1.2935.
In terms of daily dynamics, a volatility of 144 points was recorded, which is 22% higher than the average level. an acceleration has occurred for two days already, which suggests that perhaps, there is a predominant downward interest. Nonetheless, speculative positions continue to grow in the market.
Anyhow, as discussed in the previous review , traders focused on consolidating the quote below 1.2990, hoping for a recovery in price and, in turn, a build-up of short positions.
Thus, if we look at the trading chart in general terms (daily period), we will see a clear signal of the restoring downward interest, in which a breakdown of the 1.2840 / 1.2860 area will lead to the resumption of the 1.3480 --- -> 1.2674 tick. The success of this may change the medium-term trend.
With regards to news, quite good data on the UK lending market was published, where the volume of mortgage lending increased from £ 3.3 billion to £ 4.83 billion, while the volume of consumer lending fell by £ 0.622.
Then, in the afternoon, weekly data on jobless claims in the United States were released, which was also quite good, considering the decrease in their volume. Repeated applications fell from 8,495,000 to 7,756,000, while initial applications decreased from 791,000 to 750,000.
At the same time, the first estimate of the US GDP for the third quarter was published, where a 33.1% economic growth was recorded, against expectations of only 30.0%.
This overwhelming amount of strong statistical data resulted in an increase in the value of the US dollar.
As for today, only the eurozone has significant reports that could affect the market, thus, the pound will move according to correlation, as well as on the updates about hot topics such as COVID-19 and Brexit.
The upcoming trading week is expected to be one of the most volatile, as it is supported by a large number of important events: the US presidential election, the Fed meeting, the Bank of England meeting, a report from the US Department of Labor.
Monday, November 2
US 16:00 - ISM business activity index (October)
Tuesday, November 3
US presidential election
Wednesday, November 4
US 13:30 - ADP employment report (October)
Thursday, November 5
UK 13:30 - Bank of England meeting
US 13:30 - Jobless claims
US 20:00 - FRS meeting
US 20:30 - FOMC press conference
Friday, November 6
US 13:30 Moscow time - report of the US Department of Labor
- Non-farm employment change report
- Unemployment rate
- Average hourly wages
Further development
As we can see on the daily chart, there is a variable bumpiness within the values of 1.2900 / 1.2945, where the downward interest is still taking place in the market, although it is in the stage of regrouping trading forces. The subsequent downward movement is expected after the price is kept below 1.2880, with a local move towards 1.2840 / 1.2860.
The main volume of short positions will appear after the price consolidates below 1.2840 in the four-hour period, which will open the way towards the local low of 1.2674.
Indicator analysis
Looking at the different sectors of time frames (TF), we can see that the indicators on the hourly and daily periods signal SELL because of the rapid pullback of quotes, while the minute period emits different signals because of the current regrouping of trading forces.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Volatility is measured relative to the average daily fluctuations, which are calculated every Month / Quarter / Year.
(The dynamics for today is calculated, all while taking into account the time this article is published)
Volatility is currently at 40 points, which is even lower than the average level by 66%.
However, there is a high chance that this will accelerate, mainly due to the high coefficient of speculative positions in the market.
Key levels
Resistance zones: 1.3000 ***; 1.3200; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 1.2840 / 1.2860; 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
Also check the trading recommendations for the EUR/USD pair here.
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