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The overbought condition of the dollar has been discussed for a long time, especially considering that it has only worsened. It is clear that in such circumstances, the market will look for any reason for at least a minor correction. And the final data on business activity indices in the United States became such a reason, as they turned out to be slightly worse than preliminary estimates. The services PMI, for example, reached 54.9 points instead of 55.1 points. Meanwhile, the composite business activity index stood at 54.3 points, compared to the preliminary estimate of 54.5 points. Although the indices still showed growth, as the previous month's services business activity index was 53.6 points and the composite index was 53.4 points. However, even a slightly more modest growth of the indices was enough for the dollar to depreciate.
But let's be honest, the dollar is still significantly overbought, and the market will continue to seize any opportunity to further weaken the dollar. Today, the eurozone retail sales report could serve this purpose, as the pace of decline is expected to slow from -3.8% to -3.7%. Sure, it is not a big change, but yesterday even less than that was enough to cause a noticeable weakening of the dollar.
The GBP/USD pair, during its intense downward movement, almost reached the support level of 1.2350, and the volume of short positions decreased. As a result, the price rebounded, and the pound recovered following its recent decline.
On the four-hour chart, the RSI downwardly crossed the 50 middle line from below, indicating an increase in long positions.
On the same time frame, the Alligator's MAs are intersecting each other. This signal suggests the end of the downward cycle and a possible change in trading interests.
Outlook:
In this situation, keeping the price above the 1.2450 level allows for further growth, and the pound can continue to recover. Traders will consider a bearish scenario if the price falls below the 1.2400 level. In this case, the support level of 1.2350 will be hit again.
The complex indicator analysis in the short-term and intraday periods points to the pound's recovery process.
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