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After a painful hang, a move nevertheless drew up, which threw the quotation in the opposite direction. The recovery process has outlived its own or this is just the beginning – we will analyze this issue in our article.
From technical analysis, we see that after repeated attempts to break through the second stage of recovery in the face of the psychological level of 1.1000, we received only a firm foothold and a rebound in the opposite direction. So what went wrong? For five consecutive days, there was a process of focusing on the control point of 1.1000, where there was a chance of breakdown and the transition to the third – final – stage recovery is relatively oblong correction, but at this point, there was a sharp decline of interest, expressed in volatility, followed by the removal of all other factors (macroeconomic) who tried to contribute to the strengthening of the dollar. There are speculations that the local acceleration in terms of quotation recovery has overheated short positions, and when we approached the psychological level of 1.1000, there were a lot of people who wanted to fix themselves. The further alignment is already known to us, the quote rebounded and returned to the area of the periodic level of 1.1065, where it formed a stagnation for a while. Is it worth shouting that the recovery process has outlived its own, I don't think, since there is still a possibility of reduction, unless, of course, the quotation returns to 1.1080/1.1180.
Analyzing the hourly Friday day, we see that from noon and almost to the end of the day, the quote drew an upward move, having a charge of energy from the stagnation of the past days.
As discussed in the previous review, alternative positions in the case of fixing the price higher than 1.1030-1.1045 still worked. So, local positions for the purchase were laid in the direction of 1.1065, which has already brought profit to market participants.
Looking at the trading chart in general terms (daily period), we see that the recovery process is at the level of 37% relative to the entire value of the oblong correction. The maximum working out was at the level of 63%, just in the area of the control stage of 1.1000. In terms of the trend, we continue to be in a downward trend, having an oblong correction at the current time.
Friday's news background included data on inflation in Europe, where expectations for a slowdown were confirmed by 0.8% – 0.7%. Market reaction to the EU statistical data was almost absent, it was seen as market participants are waiting for the release of data on the US. In the second half of the day, the statistics on retail sales came out, and then the slowdown, and it was more significant than the forecast: prev. 4.1% – prog. 3.8% – actual. 3.1%. Also, the data released after the industrial production rushed into a deeper decline than the previous period from -0.3% to -0.8%.
The market reaction to the statistics on the United States was not long in coming, and the US dollar almost synchronously moved to the loss of positions, giving us the same local movement.
Information background from almost all sides has a particular package of information, let's make a brief excursion.
• US & China Trade War – Heads of trade and economic delegations discussing questions over the first part of the trade agreement during a telephone conversation.
"The parties in a constructive manner discussed the key concerns of each of the parties around the first part of the trade agreement, and also agreed to maintain close contact," the statement said.
In turn, Morgan Stanley expects a recovery in global economic growth in 2020. According to Morgan Stanley forecasts, the global economy will reach 3.2% in 2020. However, economic growth depends on the outcome of trade negotiations between the US and China.
• The Fed and the refinancing rate – the leadership of the Federal Reserve did not agree on a further reduction in interest rates, but most representatives support the idea of a pause in lowering interest rates.
We will get more specifics already this week, when they publish the minutes of the meeting of the Open Markets Committee, November 20.
• Brexit's fate – hope dies last, and in the Brexit world, it never dies. This is how the conservative party of Great Britain consoled themselves during the election race, who gave the floor to Prime Minister Boris Johnson that if they are elected, they will support the deal to withdraw the United Kingdom from the European Union.
Against such a backdrop of hope, the pound is rising in price, followed by a rather skeptical euro.
Today, in terms of the economic calendar, we do not have important publications, thus all work will be carried out exclusively on an information background.
Further development
Analyzing the current trading chart, we see that after approaching the periodic level of 1.1065, the quote sharply slowed down, forming a distinct consolidation in the market of versatile candles "Doji". The quote faced on its way with the range of the first stage of recovery 1.1065/1.1080, where there is an active fixation of previously opened long positions and is regarded as a move. In terms of volatility and emotional state of the market, we see a kind of readiness to jump, where at the slightest preponderance of trading forces, as part of the consolidation, a surge in price can occur.
By detailing the available time interval, we see the compression in the framework of 1.1054/1.1067, where the movement is carried out exclusively horizontally, focusing on the level of 1.1065.
In turn, traders with long positions moved to the full fixation of previously received profits, with further work on the existing consolidation as a starting point.
It is likely to assume that the existing stagnation (1.1054/1.1067) will last extremely long and we can again work on local positions. So, the main strategy is in terms of resuming the downward course, but here we need to strengthen just from the boundaries of the first stage (1.1065/1.1080). The second outcome is a return back to the framework of 1.1080/1.1180, just at the phase of the current accumulation and subsequent gain.
Based on the above information, we derive trading recommendations:
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that the short-term outlook against the background of the existing consolidation varies, without giving a clear signal. Intraday prospect to work on the reverse course, signaling upward interest. The medium-term outlook continues to work on the recovery process, signaling a decline.
Volatility per week / Measurement of volatility: Month; Quarter; Year.
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(November 18 was built taking into account the time of publication of the article)
The volatility of the current time is 18 points, which is extremely low for this period. It is likely to assume that the acceleration of volatility is still possible at the time of the breakdown of consolidation.
Key levels
Resistance zones: 1.1080**; 1.1180*; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.
Support zones: 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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