From the point of view of complex analysis, we can see a surge in local activity, which returned the quotes to its previous levels.
The past trading day justifies the assumption that speculative mood is in control of the market. Fluctuation within the area of 1.2620 / 1.2670 ended in a sharp descent downwards, as soon as the quotes consolidated below 1.2620. In addition, the reaction of the market was short-lived, and the news set the course for the US dollar in the Forex market. The quotes are still in the correction observed on June 11, in which 1.2500 was the variable support and the level 1.2770 was the resistance.
The main question now is whether the fluctuation will change in ranges from 1.2150 // 1.2350 // 1.2620 to 1.2770 // 1.3000 // 1.3300.
Such assumptions are not simple because there was an impressive movement on May 25, which was ubiquitous in the market and became a kind of reflection of speculative interest. That movement broke the resistance at 1.2150 // 1.2350 // 1.2620, and managed to push the quotes at the lower limit of the area 1.2770, which became a kind of signal of a possible change in amplitude. Now, the quotes need to stabilize through a correction, which is in the process already and has taken 30% of the previous movement. An accumulation is to follow, in which the area of 1.2620 / 1.2770 is the amplitude.
With regards to the market tacts, the sequence of the movement is correct, but there is a "BUT". The market is saturated with speculative positions, and the similar dynamics in the EUR / USD pair confirms this. This means that the market sentiment is unstable, in which in just a minimum change in external factors, speculators can change their trading position and quickly lose the current market tact. Thus, the best tactic right now is to focus on local operations, working on bursts of activity and following along with them.
Analyzing the past trading day in detail, we can see that the turn in movement occurred at 14:00 - 15:30 (UTC + 1), which corresponds to the time of publication of macroeconomic data that traders are waiting for.
As discussed in the previous review, traders carefully analyzed the dynamics in the variable range of 1.2620 / 1.2670, where in the end a sell signal was received.
In terms of volatility, a value equal to the average daily activity was recorded. If we look at the records over the last two weeks, the indicator has high dynamics, fueled by the high level of speculative positions.
Analyzing the daily chart, we can see that the pound rebounded by almost 1,500 pips from the historical lows in just less than a quarter.
Meanwhile, the news published yesterday contained data on the UK labor market, where the unemployment rate for April remained unchanged, but applications for unemployment benefits were worse than expected. The figure increased to 525,900 in May, and for April the data was updated for the worse from 856,500 to 1,032,700.
Such data weakened the pound and returned the quotes to the level of 1.2620.
In the afternoon, data on retail sales in the United States was published, which turned out much better than expected. The previous indicators were revised for the better from -21.6% to -19.9%, and the current indicators on an annualized basis were several times better than expected -6.1% (forecast -21.6%). On a monthly basis, retail sales are up 17.7% in May.
Data on industrial production was also better than forecast, showing a slowdown to -15.3% instead of -18.0%.
Such positive news gave strength to the US dollar, on which speculators earned money.
With regards to Brexit, positive news was received in terms of the progress of negotiations, but there are still a doubts and uncertainties as to whether the UK and EU can achieve consensus and sign an agreement as soon as possible.
Data on inflation in the UK was published today, in which as expected, a decrease was recorded from 0.8% to 0.5%. This suggests that a decision may be made to expand the quantitative easing program at the upcoming meeting of the Bank of England on June 18.
With regards to interest rates, the stance of the Bank of England is still ambiguous, as representatives of the regulator consider lowering it as one of the tools to support the economy, but at the same time they are not in a hurry to act on it .
As for market reaction, the pound did not react to the weak data on inflation, possibly because the preliminary estimates coincided with the actual figures of the indicators.
In the US, data on the construction sector will be published in the afternoon, in which a slight improvement in the indices are expected. Thus, construction of new houses may increase by 17.8%, and building permit may even grow by 12.4%.
Such data in the US data may trigger a rise in the USD rate.
Further development
Analyzing the current trading chart, we can see a temporary movement within 1.2540 / 1.2585, where the quote adheres to the mood previously set by the market. Such a scenario indicates that there is still a chance to drop the quotes to the level of 1.2500, as long as speculators raise their activity at a high level.
Thus, a consolidation below 1.2540 will lead to a descent to the level of 1.2500, followed by a slowdown in the movement of quotes.
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that the indicators of the technical instruments in the minute and hourly periods signal sales due to the concentration of the quotes below 1.2620, while the indicators in the daily periods are still running on an upward trend, which has changed in terms of range.
Volatility per week / Measurement of volatility: Month; Quarter Year
The measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(June 17 was built, taking into account the time of publication of the article)
The volatility at the current time is 50 points, which is quite low for this trading period. A high level of speculative operations is sure to raise volatility in the market.
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 Areas: 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
**** The article is built based on the principle of conducting a transaction, with daily adjustments
