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From the point of view of complex analysis, we see an impulsive move, which eventually concentrated on a mirror level, and now let's talk about the details. The past trading day was expressed in a local exit course, which had a characteristic impulse form, but nothing changed in the end. This is an interesting phenomenon. Let me remind you that a period earlier, the quote had a concentration of trading forces between the levels of 1.0775/1.0850, with local exits outside the established boundaries. Now, when building an upward tact, the quote managed to grow locally to the level of 1.0885, but as a result, the focus of attention of market participants fell on the mirror level of 1.0850, as it was a period earlier.
Although the actual fluctuation was one of the most significant over the past few days, it did not bring about any major changes, which means that the theory of downward development is still relevant and should not be removed from the consideration of possible scenarios.
As for our hypothesis, we still tend to downward development, but it is worth considering that the existing assumption carries a medium-term - long-term perspective. Thus, based on the global trend, local adjustments are not excluded within this movement.
Analyzing the past trading day by minute, you can see the prevailing upward interest, where the most remarkable round of long positions fell on the time period 10:00-13:00 UTC+00. The subsequent movement was expressed in the pullback and concentration of trading forces at a mirror level of 1.0850.
In terms of volatility, you can see that an activity growth is recorded above the 100-point mark for the first time in four trading days. There is a strange pattern in trading, if we have a sharp decline in volatility or a series of low activity indicators, then this is a signal of acceleration, which will bring us a local jump.
As discussed in the previous review, traders continue to consider downward development in terms of main transactions, but they do not forget about local transactions. So, following from our previous recommendation, short positions were already considered after the price consolidated below 1.0765, which did not happen. While local long positions brought a small income.
Considering the trading chart in general terms, the daily period, you can notice a remarkable amplitude in the range of 1.0775 // 1.0850 // 1.1000, which has a temporary weight of more than one month. A practically similar picture exists on the pound/dollar currency pair, which tells us about the characteristic market stagnation.
The news background of the past day contained the final data on inflation in the United States, where they recorded a significant slowdown from 1.5% to 0.3% with a forecast decline to 0.5%.
The market reaction to the poor indicators for the States was evident even before the data was published, but after the release of the indicators, the dollar continued to weaken.
The decline in unemployment to the levels of the Great Depression, and now a sharp slowdown in inflation, prompts investors to think about the further actions of the regulator [Fed], where more and more often it comes to negative interest rates.
So, US President Donald Trump has stepped up on Twitter, urging the Federal Reserve [Fed] to use negative rates.
"While other countries are benefiting from negative interest rates, the US should also accept this "gift." Big numbers!" Trump wrote on Twitter @realDonaldTrump
In turn, the head of the Federal Reserve Bank [FRB] of Chicago, Charles Evans said in his recent speech that he would react with characteristic skepticism about negative rates in the US, referring to an earlier statement by the head of the regulator that its level would continue to be closer to the zero zone.
Evans also added that he forecasts moderate growth in the United States economy in the 2nd half of the year.
"Within the framework of the basic forecast, it is quite reasonable to expect a regular economic return to growth in the second half of this year and in 2021. With sufficient progress in testing and tracking incidence, we should see a slow but steady weakening of social distance measures, which will allow more companies to resume operations and more consumers to return to normal life," said the Fed's Chairman of Chicago, Evans during video conferencing.
Today, in terms of the economic calendar, we expect data on producer prices in the United States, whose growth rate has been replaced by a decline of 0.3%, which will continue to put pressure on the US economy.
In turn, Fed Chairman Jerome Powell will make a speech today, who will announce further measures to support the economy, which may focus on the particular interest of market participants, especially with such a strong external background.
Further development
Analyzing the current trading chart, we see the concentration of trading forces at a mirror level of 1.0850, with amplitudes of about 15 points. T This kind of stagnation reflects accumulation, and the level of 1.0850 concentration of attention, thus further acceleration of volatility is provided to us as soon as the price comes out of the current fluctuations. It turns out that the strategy of local operations is still relevant, although we know the general interest of the market and we also plan to work on it.
In turn, speculators carefully analyze a stagnant level of 1.0850, planning to work on a local burst of activity.
It can be assumed that price fluctuations within the stagnation limits of 1.0840/1.0858 will be broken very soon, which means we have a chance to work at local positions in the direction of breakdown. The main transactions will be sent, as before, downward, but after the price consolidates below 1.0765.
Based on the above information, we derive trading recommendations:
- We consider selling positions lower than 1.0740, with the prospect of a movement to 1.0785. In turn, major deals are lower than 1.0765, towards 1.0700.
- We consider buying positions in terms of local operations higher than 1.0860 towards 1.0885.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments on the hourly periods have changed to the upside, due to the recent local price jump. At the same time, daily periods invariably signal a sell signal, referring to the main movement.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation calculated for Month / Quarter / Year.
(May 13 was built taking into account the time of publication of the article)
Volatility of the current time is 16 points, which is considered an extremely low indicator. It can be assumed that activity will increase significantly as soon as the existing stagnation is broken.
Key levels
Resistance zones: 1.0850 **; 1.0885 *; 1.1000 ***; 1.1080 **; 1.1180; 1.1300; 1.1440; 1.1550; 1.1650 *; 1.1720 **; 1.1850 **; 1.2100
Support Areas: 1.0775 *; 1.0650 (1.0636); 1.0500 ***; 1.0350 **; 1.0000 ***.
* Periodic level
** Range Level
*** Psychological level
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