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The pound/dollar currency pair ended the past week with intense fluctuations, resulting in an amplitude that initially touched the predicted level of 1.3200, and then returned us to the point where the rally began. A consistent update of local lows signals that sellers have a chance of an impressive decline, which will be a round of correction relative to the medium-term upward trend.
The main catalyst for sellers' trading forces is the area of interaction of trading forces at 1.3300/1.3500, where the second value reflects the conditional peak of 2019, where the quote came the other day. The repetition of the natural basis of the past frightens speculators, which entails massive fixation of long positions and, as a result, a corrective movement in the market.
Analyzing the Friday trading day by the minute, you can see that a round of short positions appeared at 9:00 UTC +00, but the main surge in activity occurred at the start of the US session, which coincides with the publication of statistical data. The round of long positions began at 12:45 and lasted until 18:45 UTC+00, which almost won back the entire decline, having a V-shaped pattern as a result.
In terms of daily dynamics, the highest indicator for the trading week was recorded at 142 points, which is 23% higher than the average level. High volatility indicates the prevailing speculative interest in the market.
As discussed in the previous review, traders worked for a decline, where the first predicted level was 1.3200, where the quote eventually went.
Considering the trading chart in general terms (daily period), you can see the same local peak in 2019 (1.3513), which was mentioned at the beginning of the article. Now, this is one of the most important values, so, depending on how market participants behave, the following development will be clear.
The news background on Friday was the publication of a report by the United States Department of Labor, where good news awaited us. So, the unemployment rate in August fell below 10% for the first time and amounted to 8.4% since the start of the COVID-19. At the same time, the number of jobs increased by about 1.4 million, which, coupled with the unemployment rate, is above praiseworthy. The dollar almost immediately went into strengthening, which made it possible to decline to the level of 1.3200.
In terms of the information background, we have another statement by the British side regarding the position on Brexit. David Frost, Chief negotiator from Britain, spoke out. He outlined a firm position, which does not provide for emotions and concessions to the European Union, unlike his predecessor, Theresa May.
"We entered after the previous government and negotiating team yielded and bluffed at critical moments, and the EU decided not to take our words seriously. So a lot of what we are trying to do this year is to convey the following message to the EU: we say what we think and they should take our position seriously," David Frost said.
In turn, British Prime Minister Boris Johnson set the deadline for concluding the deal - October 15, which coincides with the day of the Council of Europe meeting. Johnson said that they will work hard to reach an agreement this September, and he will be glad if the EU is ready to rethink its positions and agree with it.
We will have a new round of emotions on Brexit soon, as the deadlines are nearing, and at the moment, the negotiations do not have the desired results.
In terms of the economic calendar, we do not have statistics today, since the US is not active at all, due to the celebration of "Labor Day", which is officially a holiday. Thus, trading volumes may decline, which may affect the dynamics, if there is no information background in the market.
Further development
Analyzing the current trading chart, you can see that there was a downward interest during the Asian session, which returned the quote to the area of the 1.3200 level, where a stop occurred on a regular basis. Now, a price consolidation below last Friday's low of 1.3175 may lead to a new round of short positions, which will lead the quote to the next coordinate - 1.3100.
An alternative scenario considers a logical basis, where the quote takes the form of an amplitude of 1.3200/1.3270.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on the minute and hourly intervals signal a sell by focusing the price within the 1.3200 level. The daily period, in turn, has a neutral signal, but if the last Friday's low breaks down, a sell signal may be confirmed.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(It was built considering the publication time of the article)
The current time volatility is 74 pips, which is 35% below the average. The quote already has a round of acceleration, the main speculative surge may occur after the price consolidates below 1.3175.
Key levels
Resistance zones: 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 1.3200; 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
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