The pound/dollar currency pair continues to follow the previously set trajectory, where the range level of 1.2770 has already served as a resistance point three times a week, slowing down and reversing the quote. The past trading day was no exception, the natural basis associated with the range level worked out 100%. The most notable fluctuations were recorded in the period from 7:00 to 15:00 [UTC+00 trading terminal time], where at first, the technical part of the rebound played, and then the news background took over, which turned the quote.
In terms of market dynamics, there has been a consistent decrease in volatility since the beginning of the trading week [147 ---> 117 ---> 99 ---> 86 points], which just coincides with the trajectory of the initial touch of the range level of 1.2770 and the subsequent slow down near it.
The news background of the past day contained data on the labor market in the United States, where weekly unemployment claims will be published. This time, everything did not go according to plan, the forecasts did not coincide and somewhere the indicators came out better, but somewhere they were radically worse. So, on the positive side, repeated applications declined by 1,107,000, which became a sensation and joy of investors, which turned out to be temporary. Initial claims for unemployment benefits destroyed all dreams of economic recovery, they returned to the growth phase for the first time since March, 1,307,000 ---> 1,416,000 (+109,000).
The market's reaction was as follows: at the time of the publication of the data, there was a local growth of the dollar, but after understanding the initial orders, there was a speculative upward jump (weakening of the dollar).
In terms of the information background, we have the end of the next round of negotiations between London and Brussels on trade relations after Brexit, which did not yield any results. The parties still cannot find common ground on key issues, and no one is ready to make concessions, so it turns out that we are stuck in place and the time before the exit is less and less.
"Unfortunately, it is clear that we will not reach an early understanding in July on the basic principles that will form the basis of any agreement - the goal that was set at the high-level meeting on 15 June. At that meeting, the Prime Minister laid out once again the fundamental principles that, as we have repeatedly said, should form the basis of any future agreement and which are natural for the future of the UK as an economically and politically independent country. The EU proposals, although reflecting a positive attitude towards the Prime Minister's statement do not meet these conditions, and therefore significant areas of disagreement remain," stated by UK's Chief Negotiator, David Frost, following the round of negotiations.
In turn, the chief negotiator from the European Union, Michel Barnier, doubts that it will be possible to agree on a new trade agreement with England.
"By refusing to agree to terms of open and fair competition and a balanced fishing agreement, the UK is making a trade agreement unlikely for now," said Michel Barnier.
Thus, I am convinced once again that the growth in the value of the pound sterling is exclusively speculative, where, given the current mood of negotiations and the risk of a tough Brexit, the recovery of short positions will not be long in coming (this reasoning is of a medium-term nature).
Today, in terms of the economic calendar, we have data on retail sales in Britain for June, where an increase of 13.9% was recorded, an annualized slowdown of -1.6% against -12.9%. The recovery was due to the lifting of quarantine measures.
At the same time, we expect today the publication of preliminary data on the index of business activity in the manufacturing sector and in the service sector for July in Britain (8:30 Universal time) and the United States (13:45 Universal time), where the index is expected to grow everywhere.
In terms of a comprehensive analysis, we see price fluctuations within 30 pips in the immediate vicinity of the range level 1.2770. The situation is very similar to the price movement in the first half of the last day, where a logical basis may arise.
The hot forecast is that if the price consolidates below the level of 1.2720, a flow of short positions may occur, which will return the quote within the range of values 1.2700-1.2685 once again, as it was before. For a more impressive price change, sellers need to break through the value of 1.2650, which can lead to the passage of the level of 1.2620 and the formation of a full-fledged corrective move in the market.
An alternative development scenario is considered if the price consolidates above the range level of 1.2770 in a four-hour period, with the prospect of a move to 1.2810-1.2885.
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on minute intervals signal a sell due to the primary pullback. Meanwhile, hourly and daily periods maintain a buy signal due to price concentration within the main level.
Indicator analysis
Weekly volatility / Volatility measurement: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(July 24 was built taking into account the time of publication of the article)
The volatility of the current time is 53 points, which is 51% below the daily average. It can be assumed that in case of a full-fledged rebound of prices from the range level, speculative interest will arise, which will lead to an increase in activity.
Key levels
Resistance zones: 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 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
