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The pound/dollar currency pair forms fluctuations from the regions of 1.2500 and 1.2620 on a regular basis, which leads to the formation of V-shaped formations, which, in turn, are part of the multi-month flat range 1.2150 // 1.2350 // 1.2620. Based on the fact that the range of 1.2500 / 1.2620 (+/- 20 points) is the upper part of the flat, it seems that there is a kind of accumulation on the market that accumulates trading forces, and V-shaped ones confirm this formation. If this assumption coincides, then we will expect a significant acceleration in the market soon.
Detailing the past trading day, we can see that an upward spiral of positions arose at the beginning of the European session which brought the quote to the area of 1.2620. During the start of the American session, traders took up short positions, which 100% developed a morning surge in activity.
The market dynamics with all this fluctuation was 98 points, which is 13% lower than the average daily volatility.
The news background of the past day contained the final data on inflation in Britain, where its growth was confirmed from 0.5% to 0.6%, which was not immediate, but still supported the pound sterling, and we received the same upward movement during the start of the European session.
Data on industrial production in the United States will be published in the afternoon, where the rate of decline slowed from -15.36% to -10.82%, which is certainly a positive factor, just consider that they predicted a slowdown in decline to -6.2 %, that is, the result turned out to be worse than expected, but this did not stop the US dollar, it went into the strengthening stage.
In defense of the dollar, it is worth noting that US industry in monthly terms grew from 3.8% to 7.2% in June, with a forecast of 5.6%, which indicates that traders are now paying more attention to monthly indicators than annual.
In terms of informational background, there is a speech by a member of the Bank of England committee, SIlvana Tenreyro, who believes that the process of economic recovery in the United Kingdom may take an unknown V-shape recovery.
"Behavioral responses mean that Britain's economic outlook will continue to depend on the global and domestic spread of the COVID-19 virus. I suppose prevalence is gradually decreasing, my central forecast is that GDP will follow a discontinuous or incomplete V-shaped path with the first quarterly increase in the third quarter," Tenreyro said.
From the above, it is clear that a rapid economic recovery is not worth waiting for, and even if we see a local monthly increase in a particular macroeconomic indicator caused by the cancellation of quarantine measures, then we will still return to a slowdown, which will affect the pound.
Today, in terms of the economic calendar, we have data on the UK labor market that came out better than forecasts, but this did not help the pound. Unemployment remained at the same level of 3.9% with a forecast of growth to 4.2%. Applications for unemployment benefits for June declined completely by 28,100 with a forecast of growth of 250,000. The indicators of the labor market are amazing, but there is one thing, investors are not in a hurry to trust them and consider them insufficiently Frank, so the pound sterling is stubbornly standing still.
A survey of the British Chamber of Commerce, conducted on Thursday, showed that a third of enterprises expect job cuts in the next three months. This follows from the warning of the Office of Budget Responsibility that the unemployment rate could reach 12% by the end of the year and more than 13% at the beginning of 2021.
Now we can understand the skepticism of investors.
Weekly unemployment claims data will be released in the United States this afternoon, where they expect further cuts. Initial applications may decline from 1,314,000 to 1,290,000. The number of repeated applications may decline from 18,062,000 to 17,700,00. The recovery in the labor market is slow, but there is still something that can support the US dollar.
12:30 Universal time - Applications for unemployment benefits
From the point of view of a comprehensive analysis, we still see a round of short positions that stretches from the previous day, where the quote has already managed to return to the level of 1.2550. The given downward mood leads to the formation of a reverse V-shaped formation, which theoretically can return the quote to the initial area of 1.2500, with which the trading week began.
The burning forecast is that short positions still remain an actual strategy and are directed towards the level of 1.2500. At the same time, we should not forget that the accumulation process between the regions of 1.2500/1.2620 cannot last forever, and in case of breakdown of the lower border, we can have a rapid move in the direction of 1.2350-1.2150.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments relative to minute and hour intervals signal a sale due to an intensive downward movement from the 1.2620 area. The daily period still signals a purchase, but if the price consolidates below the level of 1.2500, everything can change.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Volatility measurement reflects the daily average fluctuation, calculated for the Month / Quarter / Year.
(July 16 was built taking into account the time of publication of the article)
The volatility of the current time is 56 points, which is 50% lower than the daily average. It can be assumed that volatility may increase amid speculation.
Key levels
Resistance Zones: 1.2620; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Zones: 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
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