As predicted, the publication of the report of the United States Department of Labor launched the correction process. However, a much larger decline in the pound was expected. The fact is that the data on the labor market as a whole turned out to be slightly worse than forecasts. The dynamics are clearly positive, but a number of data suggest that this trend is not yet stable.
If we talk about the content of the report of the United States Department of Labor, it causes only joy and delight. The unemployment rate fell from 13.3% to 11.1%, while it was forecast to fall to 12.3%. But what is much more important is the number of jobs outside of agriculture, which increased by 4,800,000 instead of 2,900,000. And not only is this a record increase in the number of jobs, but the previous value was revised for the better. In May, the number of jobs increased not just by 2,509,000, but by 2,699,000. The level of economic activity increased from 60.8% to 61.5%, although it was expected to grow only to 61.0%. So we can confidently say that the US labor market is clearly showing signs of recovery, which is an extremely positive factor. However, the dollar was held back from strengthening even further by data on applications for unemployment benefits. And this is despite the fact that the number of initial applications for unemployment benefits decreased from 1,482,000 to 1,427,000. The number of repeated applications increased from 19,231,000 to 19,290,000. The growth is of course insignificant, but first of all, we expected a decrease, and secondly, the total number of applications continues to be incredibly huge. This indicates that the recovery of the labor market will be long and difficult. This means that there is a possibility of a sudden deterioration of the situation. And this is what has limited the potential for the dollar to strengthen. However, optimistic moods clearly prevail.
Number of repeated applications for unemployment benefits (United States):
Today is a day off in the United States to celebrate Independence Day. The holiday itself will be tomorrow, but because it fell on Saturday, Friday was made a day off. Nothing usually happens in the market in the absence of American traders. Or almost nothing. So at least some activity, if any, will occur only during the European session. Especially since the UK is set to publish the final data on business activity indices today. Given that final data on PMI in the manufacturing sector coincided with a preliminary estimate, most likely, we can expect the same thing for the business activity index in the service sector and composite PMI. The index should grow from 29.0 to 47.0 in the service sector. The composite index of business activity could grow from 30.0 to 47.6. And in theory, this is a growth factor. However, all these data are already included in the value of the pound, and this happened during the publication of the preliminary estimate. Also, it is worth paying attention to the fact that the publication of the final index of business activity in the manufacturing sector was accompanied by a local weakening of the pound. In addition, data on applications for unemployment benefits of course yesterday limited the growth of the dollar, but in general, the situation in the United States labor market is clearly improving. And this is the prevailing thought right now.
The composite purchasing managers' index (UK):
In terms of technical analysis, you can see the initial rebound of the price from the area of 1.2530/1.2540, which is the high of the previous corrective movement. The recovery of dollar positions was not surprising to the market, given the strong news background in the United States, but the scale of the recovery was limited. As a result, the quote moved closer to the low of the day and formed a very remarkable consolidation in the range of 1.2455/1.2471, which is not quite typical dynamics for the pound/dollar currency pair.
Theoretically, this is a technical signal of accumulation, where speculative operations are highly likely to occur, on the basis of which we will see the next price jumps.
Considering the trading chart in general terms, the daily period, a descending clock is fixed from the range level of 1.2770, the structure of which is not broken and the chance of resuming the downward course is still available on the market.
We can assume that the accumulation process in the range of 1.2455/1.2471 will lead to another surge of activity in the market, where if the price goes lower than 1.2450, a path will open towards 1.2400-1.2350, thereby signaling the restoration of the downward tact.
An alternative scenario considers a change in the text component, in which case the quote should be consolidated higher than 1.2550 on a four-hour period.
From the point of view of complex indicator analysis, it can be seen that the indicators of technical instruments on the hourly and daily periods signal a purchase, by focusing the price on the conditional peak of the correction course.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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