Although there was no significant news yesterday, the market showed considerably high activity. During the European session, the pound sterling was falling, thus fully corresponding to the US dollar appreciation. However, just after the beginning of the US trade, the British currency started rapidly gaining value without any reason.
As expected, the US durable goods orders increased by 0.4%, reflecting a rise in consumer activity. It is a positive factor for the greenback since consumer activity is the main driver of the US economy.
The data should have boosted the US dollar instead of the pound sterling. Yesterday, the US also disclosed its FOMC meeting results, which did not surprise traders. The document just proved that the regulator was planning to raise the benchmark rate by 0.5% at the next two meetings.
From the fundamental point of view, the increase in the pound sterling is unexpected and has no grounds. The jump could have been spurred by some technical reasons, which became more important amid the absence of other news.
Today, the market will likely rely on technical factors, as the macroeconomic calendar is also almost empty. Although the US will publish its unemployment claims figures, they will hardly affect the market due to a minor change.
The number of first-time claims may inch up by 3k, whereas the number of continuing claims may drop by 7k. Since the data is mixed, the reports will neutralize each other.
During short-lived stagnation near the level of 1.2500, the volume of short positions on the pound/dollar pair dropped. As a result, the pair continued its upward correction and hit a new weekly high.
On the four-hour chart, the RSI technical indicator is moving in the upper area of 50/70, thus pointing to the bullish sentiment among traders. On the daily chart, the indicator is hovering around the mid-line 50, thus signaling a more prolonged correction.
The Alligator’s moving averages are heading upwards on the four-hour chart, reflecting the existing upward correction. The green and red moving averages intersect each other on the daily chart, thus pointing to a slowdown in the downtrend.
Outlook
If the pound/dollar pair consolidates above 1.2600 on the four-hour chart, it may climb to the resistance area of 1.2670/1.2720.
At the same time, the growth in the British currency may slacken amid the overbought conditions. In this case, the pair may start hovering within the range of 1.2500/1.2600, leading to a change in the trading sentiment.
In terms of the complex indicator analysis, technical indicators signal buy opportunities in the short-term and intraday periods amid the corrective movement. In the mid-term period, the indicator provides sell signals since the downtrend is still in force.