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Perhaps it is simply impossible to imagine a more vivid illustration of how overheated the market is, when investors are ready to grab anything to correct the imbalances. This time, it is in the form of an excessive oversold pound. After all, the data on housing sales in the secondary market are secondary, but the market has already demonstrated a fairly active reaction to them. Moreover, the data came out better than expected, and instead of reducing sales by 1.0%, they decreased by 0.9%. But the pound still rose. Maybe not so much, but it still did.
Home sales on the secondary market (United States):
Nevertheless, despite the still remaining oversold pound, it is likely to lose its position before the opening of the US session. This is all due to the preliminary data on business activity indices, the forecasts for which are not quite comforting. Thus, the manufacturing index should fall from 65.6 points to 64.5 points, and in the service sector, it may decline from 62.9 points to 62.5 points. In general, the picture is not the most pleasant. Moreover, according to forecasts, the composite index of business activity should decrease from 62.9 points to 62.7 points, although the decline in its components is somewhat greater. So, the data on the composite index is likely to be worse than expected, which will further undermine the pound's position.
Composite PMI (UK):
However, after the opening of the US session, the pound may not only recoup the losses incurred due to poor data on business activity indices, but it may even significantly strengthen its position. After all, the United States itself is also expected to decline in all business activity indices without exception. In particular, the manufacturing index may decrease from 62.1 points to 61.0 points. In the service sector, it is expected to decline from 70.4 points to 69.0 points. As a result, the composite PMI should decline from 68.7 points to 67.0 points. In addition, sales of new homes should fall by 2.1%, and yesterday the market showed a noticeable reaction to home sales in the secondary market. Ergo, the outlook for the dollar today is pretty sad.
New Home Sales (United States):
The GBP/USD currency pair managed to prolong the correction course during the last trading day, as a result of which the quote reached the lower limit of the psychological area 1.3950/1.4000/1.4050.
The average daily dynamics in the period from June 16 to 22 has an indicator of 134 points, which is considered a high value and indicates speculative interest among market participants.
If we proceed from the current location of the quote, we will see the price fluctuation within the coordinate 1.3950.
Looking at the trading chart relative to the daily period, traders can see an inertial downward move, which may jeopardize the upward cycle of 12.04.21-18.05.21.
In this situation, traders are still focused on the correction move, but a new step will be formed only if the price holds higher than 1.3965. Otherwise, the amplitude stroke below the 1.3950 coordinate may be delayed.
From the point of view of a comprehensive indicator analysis, it can be seen that technical instruments on the minute and hour periods signal a purchase due to a corrective move.
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