Yesterday, the pound showed just an example of exemplary behavior. It soared up as soon as the data on inflation in the United States came out. However, the data is really horrible. It was assumed that inflation would accelerate from 4.2% to 4.7%, but it turned out that it accelerated to 5.0%. This has not happened since 2008. And before that, inflation was at such high levels only in the mid-80s. Now, the Federal Reserve System will have enough work to convince everyone that the rise in inflation is still of some kind of temporary nature, and that the situation will soon return to normal. It is no longer possible to ignore this issue. Moreover, the Federal Reserve now has little choice but to raise the refinancing rate. And if before the start of the coronavirus pandemic, such a step was perceived as extremely positive, then in the current conditions the American economy is simply not ready for this.
Inflation (United States):
However, literally just now, industrial production data shocked the pound. Although in annual terms the rate of industrial production growth accelerated from 3.6% to an incredible 27.5%, over the month, industrial production decreased by -1.5%. It's all about the notorious low base effect. In general, the British economy, if it is recovering, is not as fast as we would like. Yesterday, the pound itself showed just incredible growth, and some semblance of a local correction would not hurt. So the data on industrial production came just in time. Another thing is that it will only be a temporary stop, after which the pound will resume its growth, but it will not be fast like yesterday. Rather, we will observe a slow and progressive strengthening of the pound.
Industrial production (UK):
During the last trading day, the GBP/USD currency pair showed quite high activity, as a result of which the lower border of the side channel 1.4100 / 1.4242 was hit by the breakout. There were no cardinal changes at the end of the day, for the reason that the price was not kept below 1.4080, and the market again played out the rebound tactic.
Market dynamics continues to accelerate, which is confirmed not only by an increase in the coefficient of speculative transactions, but also by the structure of trading candles.
Based on the current location of the quote, it will be seen that the price movement in the lower part of the 1.4100 / 1.4200 sideways channel is still relevant among traders.
In this situation, it can be assumed that the work on the rebound, as before, will continue in the market, where, in order to change the trading tactics, the quote must stay above 1.4080 in order to shift the swing cycle to the upper part of the channel, or stay below 1.4080, which will lead to a breakdown of the channel along a downward trajectory.
From the point of view of a comprehensive indicator analysis, it can be seen that the indicators of technical instruments on the minute and hourly intervals have a buy signal due to the return of the price to the middle level of the side channel.