The pound/dollar currency pair still managed to maintain the previously set upward mood in the market, during which the quote strengthened from the area 1.2660/1.2690 and headed towards the main range level 1.2770, where there was a natural slowdown as a result – a rebound in the price.
The weakening of the US dollar and speculative activity took place throughout the currency market, and it is enough just to switch to minute charts to immediately understand that the main emphasis was made by speculators from the United States, who first picked up the European currency, and then pulled the pound sterling with them.
The characteristic oversold of the US dollar was felt in the market up to this point, but now, it can be seen clearly, and traders around the world will obviously take advantage of this situation.
Regarding the market dynamics, there is confirmation of the speculative excitement that arose back on Monday, where the balance of daily activity was shifted in favor of acceleration, this can be most clearly seen in the illustration at the end of the article - volatility.
There was literally no news background during the past day in terms of macroeconomic data, but, as can be seen from the result, this did not become an obstacle for speculators, who continued to show high activity against the background of the information background.
The focus of all the market, of course, was the results of the European Summit, where they not only agreed on the issues of overcoming the economic consequences of the coronavirus pandemic by creating a fund to help the EU countries, but also agreed on a budget for the next seven years, which included a reserve fund of 5 billion euros for those affected from Brexit countries, which was happily welcomed by Prime Minister of Ireland, Micheal Martin.
"Brexit will be a major challenge. And I especially welcome that a special fund of 5 billion euros has been set up for use by countries most affected by this UK decision to leave the European Union" Martin said after the summit.
Let me remind you that the Brexit issue is intense for all investors who are already in Britain, or are planning to go into business, and this is not some speculation that we see now on the British currency, this is its future. If trade negotiations continue to fail, the upward speculative turn, which was created literally on nothing, will disappear, and in its place will be a downward rally, which many Bank traders are already preparing for.
Today, in terms of the economic calendar, we have the publication of data on home sales in the secondary market of the United States, where there are no bad indicators that can support the US dollar. So, the sales data could grow by 23%, from 3.91 million to 4.70 million, which may look like one of the most impressive leaps. Given the overheating of long positions, this data may well be enough for a corrective move.
From the point of view of a comprehensive analysis, we see a primary rebound from the area of the range level of 1.2770, where the quote has already managed to go below the value of 1.2700. Now, everything depends on whether long positions will be liquidated and at what level the speculative interest is, as the technical and fundamental analysis point in favor of the strengthening of the US dollar.
The burning forecast is that it is already difficult to hide the fact that the US dollar is oversold in the market, and the recent acceleration has led to touching the important price level of 1.2770, which can play the role of resistance, where traders will fix long positions and begin to form a corrective move in the market.
What happens if speculators do not move away from long positions? At this point, inertia will arise, where if the price is consolidated above 1.2810, the quote will locally step towards the psychological level of 1.3000, but this will only worsen the future situation of the pound.
Based on the above information, we will display trading recommendations:
- Consider buy deals if the price is held higher than 1.2770, towards the range level 1.2885-1.3000
- Consider sell deals in terms of liquidation of long positions, which will bring the quote towards the level of 1.2620-1.2580.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments relative to one-minute periods signal a sell, due to the primary rebound. Meanwhile, hourly periods are still on a cycle of inertia, signaling a buy, but after approaching coordinates 1.2650 - 1.2620, everything will change. The daily period, in turn, reflects the movement of the beat.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(July 22 was built taking into account the time of publication of the article)
The volatility of the current time is 55 points, which is 50% lower than the daily average. It can be assumed that volatility will still remain at a high level, be it a stage of correction or inertia.
Key levels
Resistance zones: 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 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
