From the point of view of a comprehensive analysis, we see that the week began with a quite stable downward trend, where the quotes overcame the minimum of the last week without difficulty and went on to storm the psychological level of 1.3000. In fact, the control level [1.3000] was broken at the moment of impulse jumps from 06:00 – 8:00 [UTC+00 time on the trading terminal], but then the fixation process began, at which the trading day ended. I would like to recall that this is the second attempt to resume the downward trend. The first attempt was recorded on December 23, 2019, where there was a rapid inertial move, but there was a sharp stop with reverse movement at a value of 1.2904. It is worth considering that the current situation is different and we have a kind of consistent movement, without a strong overheating of short positions, as it was in the past, thereby, the chance of further descent remains. At the same time, traders in the daytime noticed a remarkable Zigzag-shaped model [03.12.19-14.01.20], which stably draws impulses. Theoretically, the model can still be held on the market, but in this case it will have the next step, which will be approximately in the middle of a two-week move [1.3122].
In terms of volatility, there is a good indicator for the past day [95 points], which is almost equal to the average daily value. That is, it means that the market is still active and has a high speculative coefficient.
Analyzing the past minute by minute, we see the very downward movement with which the psychological level was broken. The most remarkable thing was that the day ended with the price returning to the value of 1.3000, that is, theoretically, the appearance of the Breakdown/Pullback trading model is possible, which will increase the interest of sellers.
As discussed in the previous review, speculators continue to work to lower, having another profit, and short positions are not completed yet.
Considering the trading chart in general terms [the daily period], we see a kind of movement at the peak of that very local upward movement [09/03/2019 – 12/12/19], where an attempt is made to resume the downward movement. Let me remind you that the global downward trend remains unchanged.
The news background of the past day contained data on industrial production in the UK, where the recession continued its disappointing acceleration to -1.6% with a forecast of -1.4%. From the positive, we can only say that the previous data was revised from -1.3% to -0.6%, but this still will not correct the overall picture in Britain.
The reaction of the market was in terms of weakening the pound.
In terms of the general information background, we have a statement by British Prime Minister Boris Johnson, who is preparing with full confidence to conclude an agreement on free tariff trade with the European Union. Thus, Johnson in the course of communication with reporters, said that he was in a position to conclude a better agreement with European partners, where they would get the opportunity to conclude deals with zero tariff and zero quota. As the saying goes, “wanting is not harmful,” earlier representatives from the European Union have already made a comment on these issues and the primary task is to make an agreement so that everyone benefits.
The most interesting point, in terms of informational background, was the statements of representatives of the Bank of England Gertyan Wlige and Sylvanas Tenreiro, who are ready to vote for reducing the rate to 0.5% from the current 0.75% if there is no recovery in economic activity after the recent parliamentary elections. In fact, such statements directly affect the pound, which is under pressure.
Today, in terms of the economic calendar, we have a strong event in the form of publication of inflation data in the United States, where acceleration from 2.1% to 2.3% is expected, which can provide strong support for the US dollar.
Analyzing the current trading chart, we see that the quotes began to show downward interest again after a slight stagnation within the psychological level of 1.3000, drawing out impulse candles. As previously mentioned, the current fluctuation is very similar to the Breakdown/Pullback trading method, and currently there is a clear confirmation of the theory.
In terms of the emotional component, increasing speculative interest is visible, which may be reflected in another acceleration of volatility.
By detailing the per-minute portion of time, we see a temporary stagnation within 1.2985 / 1.3000, which was already broken down by a pulsed candle at the start of the European trading session.
In turn, speculators continue to work on the decline, using the past stagnation as a gain and topping up with trading positions.
Having a general picture of actions, it is possible to assume that if the price is fixed below yesterday’s low of 1.2960, paired with an increase in the level of 1.3000 [using the Breakdown / Pullback trading method], we can get a further downward movement towards 1.2904; 1.2885 * and 1.2770 **.
Based on the above information, we derive trading recommendations:
– Buy positions are considered in case of price fixing higher than 1.3015.
– Traders already have sell positions and are moving towards 1.2904; 1.2885 * and 1.2770 **. If we do not have deals, then we can consider the entry point of 1.2955.
Analyzing a different sector of timeframes (TF), we see that the performance of technical instruments unanimously tends to further decrease, giving a sell signal.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(January 14 was built taking into account the time of publication of the article)
The current time volatility is 33 points, which is still a low indicator. It is likely to assume that volatility can increase significantly if forecasts are confirmed and accelerated from a psychological level.
Resistance Zones: 1.3000; 1.3180 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Areas: 1.2885 *; 1.2770 **; 1.2700 *; 1.2620; 1.2580 *; 1.2500 **; 1.2350 **; 1.2205 (+/- 10p.) *; 1.2150 **; 1,2000 ***; 1.1700; 1.1475 **.
* 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