From the side of a comprehensive analysis, we see a rebound in the price from the area of the local maximum on June 24. Now, let’s talk about the details.
The trading week is coming to an end, and it’s time for us to take preliminary results. Firstly, the support in the form of a variable level of 1.2250, relative to which a corrective move arose, and it brought market participants to the local maximum area on June 24 [1.2540]. The correction movement turned out to be the largest in the entire time that a downward measure existed from the range of 1.2770, where for a moment it might seem that there was something wrong, but the quote could not be consolidated above 1.2550 on a four-hour period to confirm the theory of violation of the clock component. As a result, the quote received the first signals about the resumption of the downward movement from the 1.2500 / 1.2540 area, which played the role of resistance, as well as the “Bearish Absorption” candlestick pattern for the four-hour period [candles 05:00 and 9:00 UTC+00 trading time terminal].
Regarding the theory of market development, we see that high speculative activity led to the fact that for a moment the clock component was hit by a change in direction, although many technical and fundamental factors said otherwise. On such a speculative excitement, the tactics of local operations have proved their effectiveness in the market once again, which makes it possible to work on almost any fluctuation, without focusing on other factors.
Analyzing the past trading day by minute, we can see that a round of short positions arose from 9:00 UTC+00, at the very moment when the quote came close to the local maximum of the previous correctional movement. The main jumps of activity arose already with the start of the American trading session, which coincides with the flow of the news background. The most remarkable moment was the accumulation of 1.2455/1.2471, which arose from 16:30 UTC+00 and lasted until the end of the trading day.
In terms of volatility, the lowest indicator for 27 trading days is fixed – 73 points, which is 39% lower than the average daily indicator. The slowdown in activity may be due to several factors: the accumulation process, which will lead to new surges in prices; fixing trading positions before the weekend in the United States, so as not to fall under low volumes.
As discussed in a previous review, traders considered the tactics of rebounding from the 1.2500/1.2540 area, but we’re counting on big profits. The recovery process of the relative corrective course has not yet arrived.
Considering the trading chart in general terms (the daily period), it is clear that the quote feels pressure on itself, which means that the downward beat from the range level of 1.2770 can still continue its formation.
The news background of the past day contained the report of the United States Department of Labor, which reflected a further recovery after the April collapse. Regarding the details of the report, the unemployment rate decreased from 13.3% to 11.1%, while they predicted a decline to 12.3%. The number of jobs outside agriculture increased by 4,800,000 with a forecast of growth of 2,509,000, which was a kind of record.
The reaction of the market to the data of the Ministry of Labor was in favor of strengthening the US dollar.
In terms of the general information background, we have another disagreement over the Brexit divorce proceedings, which led to the early termination of negotiations between England and Brussels. During the next round of negotiations, the parties could not find contact on a number of difficult issues, including fishing.
“A joint decision was made with the British side to cancel the talks on Friday,” a source in the European Commission said.
The current round of negotiations began on June 29 and became the first after quarantine, where a group of negotiators Michel Barnier and David Frost met in person.
It is worth noting that on Thursday Michel Barnier said that serious disagreements remain between the European Union and the UK after four days of face-to-face negotiations, which does not play in favor of the British currency.
Today, in terms of the economic calendar, we have the final data on the business activity index in Britain, where in the service sector they expect growth from 29.0 to 47.0, and the composite PMI can grow from 30.0 to 47.6.
Based on statistical data, we have a gradual recovery of the UK economy, which locally can provide the basis for the growth of the British currency in case of coincidence of data.
Today is a holiday in the United States to celebrate Independence Day, which will definitely affect trading volumes.
The upcoming trading week in terms of the economic calendar is less filled than the current one. The most interesting events include the publication of the minutes of the meeting of the Bank of England and the number of indices that occur throughout the week.
At the same time, the informational background will continue to closely monitor the Brexit divorce process, which can provide another round for speculation.
The most interesting events displayed below (Universal Time) —>
Monday, July 6
United Kingdom 8:30 – The index of business activity in the construction sector in June
USA 14:00 Moscow time – ISM index of business activity in the services sector for July
Tuesday July 7th
USA 14:00 Moscow time – The number of open vacancies in the JOLTS labor market in May
Thursday July 9th
Great Britain 8:30 – Protocol of the meeting of the Bank of England Committee on financial policy
USA 12:30 – Applications for unemployment benefits
Friday July 10th
USA 12:30 – Producer Price Index (PPI) for June
Analyzing the current trading chart, we can see a narrow consolidation of 1.2455/1.2471, which was locally broken in the upward direction. The accumulation process was not broken and market participants still concentrate on the current amplitude, where the coordinates of 1.2450 and 1.2550 are the interaction points, which will lead to major changes in the market.
In terms of the emotional state of the market, speculative interest is fixed, which can even manifest itself at low trading volumes.
It can be assumed that the price fluctuation in the accumulation amplitude of 1.2455/1.2500 will still remain in the market, where it is better not to enter local operations this time, but to wait for clear consolidations relative to the coordinates of 1.2450 and 1.2550, which will lead to the most significant changes.
Based on the above information, we derive trading recommendations:
– Consider sell deals lower than 1.2450, with the prospect of a move to 1.2400-1.2350.
– Consider buy deals in case of price consolidation higher than 1.2550 in a four-hour period, with the prospect of a move to the level of 1.2620.
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments relative to the minute, hour and day periods signal a purchase, by focusing the price on the conditional peak of the correction move. Everything can change quickly if the quote consolidates below 1.2450.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(July 3 was built taking into account the time of publication of the article)
The volatility of the current time is 23 points, which is 80% lower than the daily average. It can be assumed that the acceleration will still be on the market by 2-3 times, but if control values are broken, a major surge in activity may occur.
Resistance Zones: 1.2550 *; 1.2620; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Zones: 1.2500; 1.2350 **; 1.2250; 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 article is built on the principle of conducting a transaction, with daily adjustment
The material has been provided by InstaForex Company – www.instaforex.com