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The past trading day was a test for sellers, who had a chance to correct the overheated European currency. But, as we see from the result, the mood of speculators working on a rise did not provide an opportunity to reverse short positions in full. The quote managed to roll back a little towards the level of 1.1700, but after that there was a stop and return of quotes to the local high.
Almost all the currency pairs have risen because of the decline of the US dollar, which was mainly due to the coronavirus crisis, which until now has not receded.
The rate of weakening of the US dollar relative to 10 weeks is comparable to the March collapse, but the scale of the price change has already been surpassed, which indicates an irrational price movement.
The sharp change in the value may not have a fundamental character, but a speculative one, which arises in an unstable emotional market.
Sooner or later, everyone will realize that the market is overheated to such an extent that it is impossible to maintain current positions and those speculators who drove the European currency so far up will change their trading positions.
And all this can lead to the conditional change in the medium-term trend, which will be temporary if the market does not recover.
So, a volatility equal to the average daily value was recorded, which indicates market activity amid a characteristic stagnation / rollback.
This is because as discussed in the previous review , traders worked on a movement towards the level of 1.1700, relative to which the next move will be clear in case of a breakout or a rebound.
Thus, if we look closely in the trading chart, the daily period in particular, we can see the atypical behavior of the quotes in the form of a high-speed rise which led to the concentration of speculators and unstable inertia in the market.
With regards to news, the macroeconomic reports published yesterday included the S & P / CS Composite-20 data on housing prices in the United States, which, instead of the expected growth from 4.0% to 4.1%, a slowdown to 3.7% was reflected ... The previous figure was also revised downward from 4.0% to 3.9%.
Such figures resulted in a further price drop in the US dollar.
Meanwhile, today, the Fed will announce the results of its two-day FOMC meeting, which most likely will not present changes in the interest rates but at additional measures to support the economy, in particular the expansion of the quantitative easing program.
The press conference at 19:00 will be the most relevant for traders, from which any statements from Fed Chairman Jerome Powell will prompt a sharp change in quotes depending on the Fed's rhetoric.
Further development
Analyzing the current trading chart, we can see a surge of long positions during the start of the European session, during which the quote managed to reach yesterday's local high. Now, particular attention should be given to the consolidation levels, since the ratio of speculative positions is at an extremely high level, which means that the movement in the coming days will depend on where the quote consolidates at - at the level of 1.1780 or at the level 1.1700.
So, price jumps are expected to occur, after the announcement of the Fed's decision on monetary policy. In this regard, buy positions if the quote consolidates above 1.1785, in the direction of 1.1800-1.1840, at which if the price holds higher than 1.1850, the speculative mood may get out of control.
Meanwhile, sell positions if the quote consolidates below 1.1700, in the direction of 1.1650 - 1.1650 - 1.1550.
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that the indicators of technical instruments on the minute period signal "buy" due to a burst of long positions at the start of the European session. Meanwhile, the hourly and daily periods, as before, signal "buy", referring to the upward trend.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(July 29 was built, taking into account the time the article is published)
The volatility at this current time is 56 points, which is close to the average daily value. It is assumed that today, the speculative mood of market participants, together with the news, will be enough to accelerate volatility.
Key levels
Resistance zones: 1,1800 **; 1.2000 ***; 1.2100 *; 1.2450 **.
Support Zones: 1.1650 *; 1.1500; 1.1350; 1.1250 *; 1.1.180 **; 1.1080; 1.1000 ***; 1.0850 **; 1.0775 *; 1.0650 (1.0636); 1.0500 ***; 1.0350 **; 1.0000 ***.
* Periodic level
** Range level
*** Psychological level
Also check the trading recommendation for the GBP/USD pair here, or the brief trading recommendations for the EUR/USD and GBP/USD pairs here.
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