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Surprisingly, despite the fairly good data from the United States, the pound practically stood still yesterday. Of course, there were some fluctuations from side to side, but not strong. And it's all about the next wonders of British data. No data from the UK yesterday, but this was not required. Let's just say that at first everything went according to plan, and the pound gradually became cheaper, but at some point, everything dramatically changed. It's all about revising forecasts for the UK labour market data published today. At the same time, we revised them for the worse. After all, last week it was assumed that employment would decrease by 180,000, then yesterday, the forecast was revised to 280,000. But everyone decided to only pay attention to the forecasts for applications for unemployment benefits, which were revised for the better. If previously it was thought that the number of applications could grow by 70,000, then yesterday, these forecasts were suddenly revised to 5,000. And it was quite a strange picture, when it seems like employment should decline more, and applications for benefits remain unchanged. Perhaps this discrepancy also played a role, and market participants were confused, not knowing what to do.
At the same time, the US data itself was clearly positive, since the number of open vacancies did not decrease from 5,371,000 to 4,900,000, but increased to 5,889,000. This became possible due to the more active creation of new jobs, which was reflected in the contents of the report of the United States Department of Labor.
JOLTS Open Jobs (United States):
The British data on the labor market continues to surprise, causing more and more questions regarding its adequacy. Thus, the unemployment rate remains unchanged for the third consecutive month. And this despite the fact that employment fell by 220,000. Of course, they expected a reduction by as much as 280,000, so the data can be regarded as optimistic. However, during these same three months, employment decreased by 340,000, and the unemployment rate remained unchanged. This is contrary to all the laws of logic and mathematics. The number of applications for unemployment benefits increased by 94,400. Although they were expecting an increase of 5,000. Thus, a strange picture is obtained when employment decreases and more and more people apply for benefits, while the unemployment rate remains unchanged. This is, in principle, impossible. So, the British data on the labor market, clearly causes conflicting feelings. So the market participants found themselves in a slight confusion and did not understand what exactly to do. Although the data themselves lead to extremely unpleasant questions, this reduces confidence in official data and creates uncertainty. The only answer to this is risk aversion. Although it is difficult to call it a flight, the pound is still declining.
Change in the number of applications for unemployment benefits (UK):
Another negative factor for the pound could be today's data on producer prices in the United States, the rate of decline of which should slow down from -0.8% to -0.7%. On a monthly basis, prices may rise by 0.3%. And not only is the rise in producer prices, in itself a positive factor. The point is that inflation data will be published tomorrow, and producer prices are hinting that inflation may rise even more than predicted. So optimism about the dollar is largely justified.
Producer Price Index (United States):
In terms of technical analysis, we see a slowdown in the long-playing ascending channel, where the quote found resistance in the area of 1.3170/1.3190 along the way, which resulted in a sideways movement in the range of 1.3000/1.3190.
With regard to the recent movement, it is clear that the downward move set last Friday returned the quote to the lower limit of the range, where a stagnation formed with a slight deviation.
Relative to the market dynamics, there is a slight slowdown in the past day, but in general, there is high volatility, which indicates speculative interest.
Looking at the trading chart in general terms, the daily period, you can see a similar amplitude in the beginning of the year (January-February), where the quote concentrated in the range of 1.3000/1.3250.
We can assume that the time amplitude within the values of 1.3060/1.3100 will not last long and there will soon be a surge of activity, where the best tactic is considered to be the method of breaking the established boundaries.
Specifying all of the above into trading signals:
- Short positions, we consider lower than 1.3060, with the prospect of a move to 1.3025-1.3000.
- Long positions, we consider higher than 1.3110, with the prospect of a move to 1.3170.
From the point of view of complex indicator analysis, we see that the indicators of technical instruments at minute and hour intervals have a variable buy signal, but everything can change if the price is consolidated below 1.3060.
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