Pound Sterling Rises In Tandem With Gas Prices
InstaForex Group | Oct 21, 2021 08:06AM ET
Yesterday, the trading session began with a drop in the pound despite a positive inflation report. The UK inflation slowed to 3.1% from 3.2%. The news eased higher inflation concerns.
However, the pound's move was unexpected. The British pound followed gas prices that surged at the beginning of the trade.
It could mean that the energy crisis is still the main factor affecting the currency market. Notably, at the opening of the US trade, gas prices slumped, whereas the pound sterling started rising and returned to the correction's peak.
The absence of important macroeconomic data caused the moves. The inflation report's effect in the UK was the same as in the eurozone and the US. Not so long ago, they also recorded an insignificant drop followed by a surge.
In the UK, the situation repeated, though with a slight delay. It is no use to make long-term predictions since there is a high possibility of a jump in consumer prices.
Today, the situation is different because market participants will focus on the US unemployment claims data. Although the number of first-time claims may increase by 2,000, continuing claims could fall by 118,000.
As the US labor market situation continues improving, the US dollar may resume its uptrend.
The GBP/USD pair is hovering within the resistance area between 1.3800/1.3830, with gradually reducing volumes. The 50.0 Fibonacci level is critical for the bears. It also crosses the resistance area.
The RSI technical indicator has hovered near the 70 line for the sixth day in a row on the four-hour chart. It indicates that the pound is overbought.
On the daily chart, we see a fully-fledged correctional movement from the support level of 1.3400. Although the British pound significantly advanced, the downward trend that began in early June is still intact.
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The oversold level could affect the British pound's trend. If the price fixes below 1.3780, traders may receive the first short signal. In this case, the pair may slide to 1.3730. If the predictions come true, the pound sterling is likely to lose value gradually.
The alternative scenario will become possible if the price consolidates above the resistance area. In this case, the corrective movement will prolong towards 1.3900.
In terms of the complex indicator analysis, we see that technical indicators provide sell signals for the short-term and daily periods due to the price drop from the resistance area.
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