The trading week is coming to an end. If we summarize the preliminary results, we will see that the pullback from the local high at 1.3169 did not give the desired result, as the corrective move did not come to the market, and the psychological level of 1.3000 became a support that returned the quote to the conditional high.
How long will this upward tact last? It all depends on the speculators. A lot of reversal signals have already appeared, but alas everyone still ignored it and continued to trade in a bullish mood in the market. Perhaps, a little push is needed from the information and news background, to change the situation with the dollar.
A similar situation also exists for the EUR / USD currency pair, which already updated all possible highs in this period, having a vertical price movement and no full-fledged correction.
Anyhow, in the price range 1.2770 // 1.3000 // 1.3300, a fluctuation has occurred in the upper limit, where the 1.3200 / 1.3250 area already affects the volume of long positions.
Thus, analyzing the last trading day by minute, we can see that the local high was updated at the opening of the European session, during which the quote managed to rise to a price level of 1.3180 / 1.3184, but after that it reversed in the chart.
Volatility was also low, recording at only 75 points, which is 33% below the average daily value, 112 ---> 75.
Such gives light to the theory "calm before the storm", with regards to the behavior of market participants.
Meanwhile, as discussed in the previous review , traders worked on holding the quote at the conditional price high, but still did not forget about the area of interaction of trading forces at 1.3200 / 1.3250.
So, looking at the trading chart in general terms (daily period), we can see that as early as five trading days in a row, a conditional sideways move has taken place, in the structure of which there are versatile Doji candles, signaling a high degree of uncertainty.
As for news that were published yesterday, one announcement important was the decision of the Bank of England to keep the interest rate at 0.1% and maintain the asset repurchase program at £ 745 billion.
Bank of England Chief Andrew Bailey said that although negative rates are an integral part of the Central Bank's toolkit, the regulator is in no hurry to use it to pull the British economy out of the crisis.
With regards to statistics, the latest data on the US labor market came out better than expected, as initial claims for unemployment benefits decreased from 1,434,000 to 1,186,000, while repeated applications fell from 16,915,000 to 16,107,000.
Although the US dollar did not immediately rise because of such good statistics, it nevertheless strengthened within the day.
Today, another US labor market report is expected, and it will definitely cause a stir among speculators, especially now, in the conditions of almost two months of sale in the US dollar.
The first thing that traders should pay attention to is the unemployment rate, which is expected to drop from 11.1% to 10.5%, mainly due to the creation of 1,550,000 new jobs. In a situation with a colossal oversold of the US dollar, a positive information and news background in the US may provoke a flow of short positions on the GBP / USD pair.
The upcoming trading week includes important macroeconomic reports such as data on the UK labor market and inflation indicators in the United States, which can provoke high activity in the market.
Monday, August 10
US 15:00 - JOLTS (June)
Tuesday, August 11
UK 09:30 - Unemployment rate (June)
UK 09:30 - Applications for unemployment benefits (July)
UK 09:30 - Average salary with / without bonuses (June)
US 09:30 - PPI (July)
Wednesday, August 12
UK 07:00 - Preliminary GDP (Q2)
UK 07:00 - Volume of industrial production (June)
US 13:30 - Inflation (July)
Thursday, August 13
US 13:30 - Claims for unemployment benefits
Friday, August 14
US 13:30 - Volume of retail sales (July)
Further development
Analyzing the current trading chart, we can see that a downward movement from the area of 1.3170 / 1.3185 is already taking place, and holding it can easily return the quote to the psychological level of 1.3000, just against the background of positive statistics on the United States. Traders are well aware of the fact that a price return to the level of 1.3000 will not correct the situation with the overbought pound and oversold US dollar, thus, everyone is waiting for a full correction, not just a pullback.
So, to minimize the risk, wait for the quote to consolidate first below the area of the psychological level of 1.3000 (1.2950 // 1.3000 // 1.3050).
An alternative scenario could occur though, if the quote consolidates above 1.3185, which may lead to a movement towards the border of the price range 1.2770 // 1.3000 // 1.3300. The area 1.3200 / 1.3250 reflects the interaction of trade forces from January to March 2020, where the volume of long positions decreases on a systematic basis.
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that the indicators of technical instruments in the minute TF signal "sell" due to a price rebound from the conditional high. Meanwhile, the hourly and daily TFs continue to signal "buy" due to a fluctuation around the high. However, the hourly TF can change indicator from buy to sell after the quote consolidates below 1.3100.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(August 7's was built, taking into account the time this article is published)
The current volatility is 62 points, which is 44% below the average daily value. Its dynamics could accelerate, after the publication of the latest data on the US labor market.
Key levels
Resistance zones: 1.3200 (1.3250) **; 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); 1.1300; 1.1000; 1.0800; 1.0500; 1.0000.
* Periodic level
** Range level
*** Psychological level
Also check the brief trading recommendations for the EUR / USD and GBP / USD pairs here .
