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The downward movement in the pound/dollar pair exceeded all expectations. The quote was consolidated below the psychological level of 1.3000 for the first time since July, which became a clear signal of a corrective course in the medium-term upward trend.
The skeptical attitude towards the value of the pound did not let us down, and the high (1.3513) of 2019 perfectly played the role of the interaction of trading forces, together with a strong platform for market reversals. It may seem that the correction is already impressive, but before jumping to conclusions, look at the rapid upward movement of more than 2000 points from this spring. The pound sterling is overheated, and its value is still high considering all the existing problems in Britain. There is a springboard for a decline. For a start, we consider the level of 1.2770, which has long served as an area of interaction between trade forces. The most impressive stabilization of trading interest may occur later, in this case, the pound's exchange rate allows a decline to the area of 1.2000/1.2150, where there will be a stop with the transition to flat mode.
Analyzing the last trading day by the fifteen-minute, you can see that a round of short positions arose at 8:15 UTC+00 and lasted until the end of the trading day, where the psychological level of 1.3000 was broken.
In terms of daily dynamics, the highest volatility indicator for 12 trading days is recorded. It was 193 points, which is 63% higher than the average level. The increase in activity is associated with the emotional background in the market, which is used by speculators. Thus, activity will continue to be at a high level until the momentum in the information field – Brexit, subsides.
As discussed in the previous review, traders considered a further decline in the event of price consolidation below 1.3100, which ultimately happened in the market.
Trading recommendations fully coincided, and another profit was recorded on the deposit.
Looking at the trading chart in general terms (daily period), you can see that the recovery process relative to the medium-term trend is 27%.
The news background of the past day did not have any significant statistics on Britain and the United States.
In terms of the information background, a full-scale hysteria related to Brexit rises, which sets the pound in motion along a downward trajectory. The next round of trade negotiations between England and Brussels is going very restlessly, and the unauthorized decisions of British Prime Minister Boris Johnson, who decided to rewrite part of the Brexit agreement regarding Northern Ireland, is to blame.
Europe is at a loss, as well as Northern Ireland, since this step will be considered a violation of international law, but England has not written laws, so they went through blackmail.
In turn, Britain's chief negotiator David Frost said that both sides can no longer afford to follow the beaten track in the negotiations and the EU needs to show more realism about the UK's new status.
As we can see, the decline in the pound sterling is fully justified by the information background, and if the heat does not subside, then this is only the beginning of a large-scale decline.
In terms of the economic calendar, JOLTS data on the number of open vacancies in the US labor market for July will be published today, where it is predicted to grow from 5,889,000 to 6,000,000, which could benefit the US dollar.
At the same time, traders need to constantly monitor the news feed, as Brexit will continue to put pressure on the market.
Further development
Analyzing the current trading chart, you can see that the downward interest is still taking place in the market, where the quote has already managed to fall to the level of 1.2920. Now, all the attention of traders falls on the information background, since the next move in the market will be clear depending on it. In terms of decline, there are still horizons, but to start, the quotes need to consolidate below 1.2885, which will open the way towards 1.2770.
In terms of alternative development, a temporary stagnation may occur within the boundaries of 1.2900/1.3000.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on the hourly and daily periods signal a sell due to the general depth of decline. On the other hand, minute intervals signal a buy due to a local pullback.
Weekly volatility/Volatility measurement: Month; Quarter; Year
The volatility measurement reflects the average daily fluctuations, calculated per Month / Quarter / Year.
(It was built considering the time of publication of the article)
The volatility of the current time is 66 points, which is 44% below the average. The speculative mood still takes place in the market as an informational background, which can give a new round for acceleration.
Key levels
Resistance zones: 1.3200; 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).
* Periodic level
** Range level
*** Psychological level
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