Everything was supposed to only depend on inflation in the United States, but instead, the determining factor was the relationship between the world's two largest economies. The United States, in effect, imposed new sanctions on China by passing a law that lifted Hong Kong's special position in terms of trade and financial privileges that made it easier for companies registered in the city to access the US market. In response, China announced that it will soon impose sanctions on individuals and companies involved in the adoption of this law. So the trade war between the United States and China is just gaining momentum. It is not strange that this only negatively affects the dollar. The fact is that China is the largest economy in the world. Therefore, the advantage is on its side.
In addition, the market actually ignored data on industrial production in the UK, the decline of which slowed down from -23.8% to -20.0%. But it was expected that the pace of recession would slow down somewhat less, only to -20.3%. The state of affairs in the British industry was slightly better than expected.
Industrial Production (UK):
But of course, it is much more interesting that due to the next round of confrontation between China and the United States, market participants were too distracted to turn to US inflation. Although it has grown from 0.1% to 0.6%. It coincided with the most optimistic forecasts. And from this it follows that the Federal Reserve, at least in the near future, will not take any steps to soften its monetary policy. But the trade war between the two largest economies in the world overshadowed everything.
Inflation (United States):
Obviously, in the near future, relations between the United States and China will determine investor sentiment. Especially if China moves from words to actions. But the pound has a certain reason for moderate optimism even without this. Indeed, inflation is also expected in the UK, from 0.5% to 0.6%. And unlike the dollar, the threat of sanctions from China is not yet hanging over the pound. There are fears that inflation may not grow, but decrease, to 0.4%. In this case, the pound will be forced to somewhat surrender its position.
Inflation (UK):
If we do not receive specifics from China regarding retaliatory sanctions today, then the dollar has a chance of a slight increase. These chances are related to industry, the decline rate of which should slow down from -15.3% to -6.2%. And it is immediately evident that the scale of the decline in US industry is not as catastrophic as in Great Britain. That is, the American economy is clearly feeling no worse. Rather, much better.
Industrial production (Great Britain):
In terms of technical analysis, there is a surge in activity from the support level of 1.2500, where the pound sterling locally managed to jump towards the value of 1.2580, after which there was a slowdown. In fact, the market still has a speculative interest, which plays with the quote in a chaotic manner, but at the same time holding it on the horizontal course for at least 3.5 months.
Looking at the trading chart in general terms, the daily period, you can see that the key levels that traders most often pay attention to are the coordinates: 1.2620(+/-30p); 1.2500; 1.2350; 1.2150.
We can assume a temporary price fluctuation within the current stagnation of 1.2562/1.2586, where the next move will be relative to the price taking points.
Specifying all of the above into trading signals:
- Short positions, we consider lower than 1.2560, with the prospect of a move to 1.2500.
- Long positions, we consider higher than 1.2590, with the prospect of a move to 1.2620.
From the point of view of complex indicator analysis, we have a versatile signal, where hourly periods tend to sell, and daily periods still signal a purchase. Relative to minute intervals, there is a buy signal.
