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Volatility below the average level torments market participants for the third day in a row, when will it end and will the Fed meeting affect the intensity of fluctuations, we will analyze in our article.
From technical analysis, we see another touch of the fulcrum in the face of the level of 1.1080, where, with surgical accuracy, the quote worked out a local minimum of 1.1073 (October 25). The previously designated level of 1.1080 is converted into a range, but so far with variable boundaries. In terms of volatility, there is still a characteristic low amplitude slowdown (49 – 30 – 45 points), which confirms the fact of support in terms of the level of 1.1080, near which all this oscillation occurs. The emotional mood of market participants, to put it mildly, is at a low start since almost all the information flow available earlier (October 25-29) passed by the side of the market with minimal return. Thus, the waiting position will help to stir up the market again, perhaps today.
Analyzing the past day hourly, we see that after the quote once again touched the local minimum of 1.1073, there were remarkable spikes in the price. So, the focus of attention is drawn to the period of 12:00-17:00 hours (time on the trading terminal), where the quote almost vertically traced the course of 45 points, having just the same daily rate. The subsequent movement was in terms of a flat horizontal move, with a low-amplitude oscillation of 1.1106/1.1118, which many market participants must have noticed, as it is an excellent platform for future transactions.
As discussed in the previous review, most of the traders, including speculators, were out of the market, as the main task was to identify the fixation of the price below 1.1070 or the passage of the range of 1.110 – 1.1120. As you understand, neither was committed. I do not exclude that there were also those traders who did not want to sit on the fence (outside the market) and still decided to work on the rebound from the local minimum of 1.1073, which turned out to be quite a profitable venture in this period.
Looking at the trading chart in general terms (daily period), we see a good attempt to recover relatively oblong correction, with the first stage of decline, but there are still not enough sellers to bring down the previously set emotional mood. Regarding the trends, then everything is unchanged, the main movement is downward, local upward, which reflects the same inertial-emotional behavior.
The news background of the last day contained data on the United States, where the S&P/Case-Shiller house price index remains at the same level of 2.0%, but unfinished transactions on home sales, on the contrary, show an increase from 2.5% to 3.9%. Whether this helped the US dollar in any way, correctly, did not help in any way, it was already under characteristic pressure.
What puts pressure on the American currency, or does a complex factor play a role here?
We have here both information background and emotional. Let's look at everything in order.
The European Union finally approved the postponement of Brexit until January 31, 2020, and the head of the European Council Donald Tusk, not restraining himself, tweeted that I would keep my fingers on the cross so that finally it would end and the postponement was the last.
"To my British friends, the EU 27 countries have officially approved the postponement. It could be the last. Please use your time wisely. I also say goodbye to you because my mission is coming to an end. I'll keep my fingers crossed for you." – Twitter Donald Tusk @eucopresident
In turn, the results of the two-day meeting of the Federal Committee on Open Markets, which directly set the emotional mood of market participants, are a great pressure. So, the Fed meeting, which began yesterday, is already being spurred on by life-giving tweets of Mr. President Donald Trump, who wrote succinctly, but in his spirit: "The Fed has no idea! We have unlimited potential, held back only by the Federal Reserve."
The fact that the rate with a probability of almost 94% (according to FedWatch CME Group) will reduce, no one will be surprised, but the comments of Jerome Powell can cause a significant shift in market volatility.
So, there are rumors that the Fed is preparing to take a break after the third rate cut, where it is possible to suspend the campaign to ease monetary policy this year.
As you may have guessed, the market reaction to the reduction of the refinancing rate of 2.00% – 1.7% is likely to be the one in the minds of emotional traders, and this move of the Fed is already in some way taken into account in the quotation. Here, in general, attention is focused on the subsequent press conference.
Today, in terms of the economic calendar, we have a large reservoir of statistical data. So, data on Europe has already been released, inflation in Spain has remained at the level of 0.1% (preliminary). Germany reported unemployment, where its level was 5.0%, and the number of unemployed increased by 6K.
In the afternoon, we are waiting for the ADP report on the level of employment in the private sector of the United States, where they expect a decline from 135K to 120K, but that's not all. The first estimate of US GDP will be released synchronously, where they expect a slowdown in economic growth from 2.0% to 1.7%.
Statistics are not in favor of the US dollar, thus the pressure on the green paper should remain.
The key event of the day and even the week is the Fed meeting followed by a press conference, as described above.
19:00 London time – The decision of the US Federal Reserve on the interest rate.
19:30 London time – Press conference of the Federal Open Market Committee of the Fed.
Further development
Analyzing the current trading chart, we see that the upward move that originated yesterday led us to the peak of last Friday – 1.1122, but so far the quote has not been able to fix higher. So, as things stand with the recovery process, frankly, not really. The pivot point in the face of the level of 1.1080 quite confidently holds the sellers, and the characteristic indecision and hope of returning to the resistance point of 1.1180 are still present in the market. Thus, we see a clear divergence in interests, which reflects a decrease in volatility and emotional mood of market participants.
Detailing every minute the available area of time, we see that the remarkable stagnation of the end of yesterday was broken up, having almost in the morning rising candles, as if already there is a laying of the price for the upcoming news stream.
In turn, speculators moved to active analysis and entry into long positions as soon as the price touched the mark of 1.1120. This is probably not a final decision, as there will be new points and new races later in the evening.
It is likely to assume that in the case of overcoming the peak of last Friday – 1.1122 and maintaining the characteristic emotional-inertial course, the quote can continue to grow towards 1.1150 – 1.1180. An alternative scenario is considered at the time of the Fed press conference, as there may be a jump in the opposite direction.
Based on the above information, we derive trading recommendations:
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that the indicators at all major time intervals signal an upward interest. Short-term indicators work on the momentum of the breakdown of recent accumulation. Intraday intervals have gone from the focus of recovery. The medium-term perspective adheres to an earlier inertial course.
Volatility per week / Measurement of volatility: Month; Quarter; Year.
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 30 was built taking into account the time of publication of the article)
The volatility of the current time is 17 points, which is a low indicator for this period. It is likely to assume that the massive information and news background will play a role and volatility will accelerate, exceeding the daily average as a result.
Key levels
Resistance zones: 1.1180*; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.
Support zones: 1.1080**; 1.1000***; 1.0900/1.0950**; 1.0850**; 1.0500***; 1.0350**; 1.0000***
* Periodic level
** Range level
*** Psychological level
***** The article is based on the principle of conducting transactions, with daily adjustments.
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