The GBP / USD pair successfully avoided going into a correction, mainly due to the bulls who appeared on the psychological level of 1.3000, which kept the bears from pulling the quote down in the price chart.
Hence, the pound is still overbought, and the speculators who are currently holding the market do not care about this factor. As a result, the pair has still not undergone a correction, and the pullback of quotes end instead with the strengthening of speculative positions.
Using technical analysis, we can see that the current movement is carried out within the price range 1.2770 // 1.3000 // 1.3300, in which the quote almost reached the upper limit, which may affect the volume of long positions.
So, if we analyze the past trading day in detail, we will see that the main surge in speculation, which began at 09:00, led to a movement towards the price level of 1.3060, after which the quote rose even further, up to the local high at 1.3169.
Such resulted in a volatility above 100 points, which indicates the superiority of speculators in the market.
Meanwhile, as discussed in the previous review , traders already expected a rise towards the local high on July 31, after the quote consolidated above the level of 1.3125.
Thus, in the trading chart (daily period), a Shooting Star pattern appeared at first on July 31, and then was refuted on August 3 and 4 when Doji candles appeared, which indicates indecision and uncertainty among market participants and possible price jumps.
Meanwhile, news published yesterday included data on business activity in the UK services sector, which grew from 47.1 to 56.5 as the preliminary estimate reflected an increase to 56.6. Composite PMI also increased from 47.1 to 57.0 in July.
Such good data helped increase demand for the pound in the market.
In the afternoon, a report on employment in the US private sector was released by the ADP, which revealed that a total of 167,000 workers were hired in July, much lower than the forecast of 1,550,000.
This suggests that the US labor market is still going through hard times, and high rates of CVID-19 infection exacerbate the situation in the economy.
Today, the Bank of England announced its decision on interest rates, maintaining it at 0.1%, and also left the quantitative easing program unchanged at the level of 745 billion pounds.
The Bank of England estimates that UK GDP will return to pre-crisis levels no earlier than the end of 2021, and its forecast for 2020 is a fall to 9.5%, which will be the worst figure in a century.
With regards to inflation, the bank does not exclude the possibility that the indicator may reach negative values in July, but in the long term, they expect it to grow to 2.3% (by 2023).
"The committee does not intend to tighten monetary policy until there is clear evidence that significant progress has been made in eliminating spare capacity and achieving the 2% inflation target on a sustainable basis," the Bank of England said.
Today, the weekly report on unemployment claims in the US will be published, the forecast of which is an increase in initial claims from 1,434,000 to 1,450,000, and a decrease from 17,018,000 to 16,900,000 on repeated ones.
Analyzing the current trading chart, we can see that when the Bank of England announced its decision on interest rates, volatility soared, on the basis of which the local high was broken (1.3169 ---> 1.3181). Holding the quote above the said level may signal a prolonged upward move, which could lead the quote to the upper limit of the price range 1.2770 // 1.3000 // 1.3300.
At the same time, the pound remains on the verge of fatal overbought, which means that the movement is unstable and that everything can change quickly in the market.
The range 1.3200 / 1.3250 reflects the interaction of trade forces, which may affect the reduction of long positions.
Analyzing the different sectors of time frames (TF), we can see that the indicators of technical instruments on the minute, hourly and daily periods signal "buy" due to the passing of quotes above the local high.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(August 6 was built, taking into account the time this article is published)
Volatility is currently 75 points, which is 33% below the average daily value. Its dynamics still has the ability to expand, the tolerance of which is 70-120 points.
Resistance zones: 1.3200 (1.3250) **; 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); 1.1300; 1.1000; 1.0800; 1.0500; 1.0000.
* Periodic level
** Range level
*** Psychological level