The collapse of the pound was triggered by data on retail sales in the United States, which, although reduced, still turned out to be significantly better than forecasts. Retail sales growth was expected to slow down from 18.0% to 11.5%. However, they slowed down to 15.8%. In addition, the previous value was revised up to 18.7%. And do not forget that retail sales account for almost a quarter of the entire American economy, and consumer activity is its main locomotive. And retail sales are just the main indicator of this very consumer activity. So, it turns out that although consumer activity has decreased, but on a much smaller scale. And in this light, it is not surprising that the pound was rapidly losing its positions.
Retail Sales (United States):
It is clear that after such a strong movement in the market, conditions have formed at least for a local correction. And logically, the reason for this very correction should have been the data on inflation in the United Kingdom, but something went wrong. It was expected that inflation would decrease from 2.5% to 2.4%, which, of course, looked quite good in a situation of increasing fears about global price growth. But inflation has slowed down to 2.0%, and it looks very good. However, such a sharp decline in inflation only plunged investors into perplexity. It turns out that the British economy is facing not only an increase in inflation, but also an incredible volatility and unpredictability of inflationary dynamics. And it is absolutely not clear how to react to such a development of events. On the one hand, reducing inflation is certainly good, but a number of new questions arise. The most important of them is the question of what will happen to inflation in the future, and how such price volatility will affect consumer activity. So, the pound simply froze in place. Nevertheless, investors will calm down a little during the day, and the overbought dollar will not disappear anywhere, so the probability of a slight correction is still high.
Inflation (UK):
The GBP/USD currency pair broke through the variable support point of 1.3800 during an intense downward move. The volume of short positions increased, which pushed speculators to an inertial movement towards the value of 1.3725.
The recovery movement relative to the ascending cycle in the period of July 21-30 continued to gain momentum. More than 50% has already been played, which supports the theory of full recovery.
Expectations and prospects:
At this time, there is a slight oversold of the British currency, which can lead to stagnation - a pullback. The subsequent growth in the volume of short positions will occur when the price is kept below 1.3715 for a four-hour period.
The complex indicator analysis has a sell signal based on the short-term, intraday, and medium-term periods.
