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The sharp surge of short positions brought GBP / USD down to 1.2885, but then the quote stopped and turned back towards 1.3000.
Nevertheless, market sentiment is still bearish, so we should continue trading short positions, especially if there is an opportunity to sell.
For example, in the M15 chart, we can see that short positions arose and pushed the quote to 1.2885. However, a reversal occurred immediately after, which returned GBP / USD back to 1.3000. Such indicates that speculation is currently high in the market, and it is responsible for the large movements in GBP / USD.
In addition, having high volatility also supported this idea, as yesterday, the average indicator is at 137 points.
JOLTS data for July also supported this initial decline in the pair, as the number of open vacancies in the US labor market came out better than the forecasts. The previous indicators were revised from 5,889 to 6,001, and the current data was several times ahead of the forecast: 6,000 ----> 6,618.
Issues regarding Brexit also contributed to high speculation, as yesterday, a bill was released that was aimed to ensure integrity of the UK home market after Brexit, as well as addresses the extremely difficult border issue between Northern Ireland and the Republic of Ireland.
The government agrees that this bill would violate international law and undermine confidence in the country, which could lead to even greater problems and, as a result, the absence of any trade agreement with the EU, except for the WTO with general rules.
Thus, finding a consensus with regards to a deal seems to be getting farther and farther each day. If the two sides ultimately fail to get an agreement, Brexit will be tough, which will directly affect demand for the pound in the market.
In the meantime, weekly report on claims for unemployment benefits in the US will be published today, the forecast for which is another decline in volume.
Initial applications may drop from 881,000 to 846,000, while repeated applications may decrease from 13,254,000 to 12,925,000.
The upcoming ECB meeting may also affect GBP / USD rates in the market.
Further development
As we can see on the trading chart, GBP / USD traded within 1.2990 / 1.3035, but around it activity has lessened, and this can provoke another round of speculation in the market. The best trading approach is to break the quote out of the current price range, which could be done if we trade local operations.
Thus, consider the following trading recommendations:
- Set short positions from 1.2990 to 1.2950 - 1.2885.
- Set long positions from 1.3040 to 1.3065 - 1.3100.
Indicator analysis
Looking at the different time frames (TF), we can see that the indicators on hourly and daily periods signal sell due to the overall bearish sentiment. Meanwhile, the minute period has a variety of signals since the quote still has not broken out of the price range.
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 at 57 points, which is 52% below the average value. It will only accelerate if the quote breaks out of the current price range.
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).
* Periodic level
** Range level
*** Psychological level
Also check trading recommendations for the EUR/USD pair here, or brief trading recommendations for the EUR/USD and GBP/USD pairs here.
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