From the point of view of complex analysis, we can see the V-shaped movement of the quotes, as yesterday’s trading formed a recovery process, during which the quote returned to the 1.2250 level. The downward movement observed on May 1 was one of the largest correction recorded.
A correction movement may be considered as a signal of a change in the market tact, but not in the case of the current situation, as the quotes managed to overcome April 7’s low and is almost to the psychological level of 1.2000, where only 73 points remain before reaching it.
The movement is set, and the target development is almost reached. Local corrections are not excluded on the way, since they will not bring any change in the market tacts.
Analyzing yesterday’s trading by minutes, we can see that the upward mood occurred almost at the opening of the trading week, but the main acceleration came at 09: 45-16: 15 (UTC + 1). The subsequent fluctuation had variable boundaries of 1.2180 / 1.2220, on which the trading day ended.
As discussed in the previous review, traders focused on a downward development, but did not exclude local operations, which brought an impressive increase in the trading deposit.
The trading recommendation on Monday regarding local positions coincided 100%.
[Open buy positions above 1.2125, in the direction of 1.2150-1.2180.]
In terms of volatility, another 14% acceleration was recorded relative to the daily average. Only once, in the past eight trading days, did the indicator record a value below 100 points. This indicates high market interest and high speculative activity.
Analyzing the daily chart, we can see the unstable movement between the levels 1.2150 and 1.2620, where the main trading forces are from sellers who are consistently trying to restore the main direction.
The news yesterday did not contain any important statistics on the UK and the US. Nevertheless, market activity was still high.
The situation with the coronavirus, as well as its economic consequences are still monitored. In the UK, Chancellor Rishi Sunak believes that the British bill, which finances 7.5 million workers, costs the country £ 8 billion a month, which is about two-thirds of the country health care costs. Thus, the duration of the said program may extend only until fall. In addition, even with such a scheme, unemployment rate in Britain in the second quarter jumped up to 10%.
The UK is also worried about the post-Brexit trade negotiations, which, until now, still has no results. If the negotiations fail to conclude at the end of 2020, fines worth more than £ 380 billion will come. Knowing such size, London calls on the EU to show flexibility, but the EU’s position regarding equal conditions remains unchanged.
“We unequivocally declare to the EU that we cannot conclude a deal on these conditions, but I am sure that a deal will be agreed upon. It will just require some degree of flexibility on the part of the EU, which I am sure they will recognize, “said British politician Michael Gove.
Meanwhile, data on the UK labor market was published today, where the number of applications for unemployment benefits in April reached 856,500, several times higher than the 2008-2009 crisis. Unemployment rate fell from 4.0% to 3.9%, but the data came from March, not April. Thus, the consequences of quarantine measures await us in the next period, where the indicators will be terrible.
Analyzing the current trading chart, we can see the resumption of the movement, where the quote managed to update yesterday’s high and successfully consolidate above it. Meanwhile, the subsequent fluctuation reflected a local slowdown within 1.2250, where the candle structure appeared to be doji, signaling the indecision of market participants, as well as the concentration of trading forces.
Since the correction move did not change the current trading course, it can be assumed that the movement is just temporary, so quotes will return to its previous levels soon.
The concentration of trading forces within 1.2220 / 1.2266 will be an excellent platform for local transactions, where the main goal of trading is breaking the established boundaries. For recovery, the quote must return below 1.2150.
Based on the above information, we derived these trading ideas:
– Open buy positions above 1.2270, targeting 1.2330–1.2350.
– For recovery, open sell positions from the value of 1.2215, targeting the level of 1.2150. After which, when quotes consolidate below 1.2140, open sell positions in the direction of 1.2080–1.2000.
Analyzing the different sectors of timeframes (TF), we can see that the technical tools on hourly periods reflect an inertial move, signaling purchases. The daily periods, on the other hand, still signal sales, which reflects the general market mood.
Volatility per week / Measurement of volatility: Month; Quarter Year
The measurement of volatility reflects the average daily fluctuation, calculated by Month / Quarter / Year.
(May 19 was built, taking into account the time of publication of the article)
The current volatility is 83 points, which is considered low relative to the average daily value. Activity may increase if a reversal occurs. If not, the dynamics will continue until the end of the trading day.
Resistance Zones: 1.2250; 1.2350 **; 1.2500; 1.2620; 1.2725 *; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support areas: 1.2150 **; 1.2000 *** (1.1957); 1.1850; 1.1660; 1.1450 (1.1411); 1.1300; 1,1000; 1,0800; 1,0500; 1,0000.
* Periodic level
** Range Level
*** Psychological level
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.