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From the point of view of a comprehensive analysis, you can see the price consolidation below the area of interaction of trade forces, and now let's talk about the details. The last trading day was marked by an impulsive downward movement once again, during which the quote managed to overcome the area of interaction of trading forces 1.2250, which conditionally reflected the minimum of April 21. The price passing this level was a good signal for sellers, since the recovery process that the followers of the downward development are so hoping for can take place, where 1.2250 played a role as a catalyst for trading forces.
It is worth noting that the level of 1.2250 was not the last for a one-and-a-half-month flat 1.2150 (1.2250) //1.2350//1.2620, the lower border stretched to the area of 100 points, where the subsequent mark reflects the conditional minimum of April 7, which is what traders should focus on.
The theory of downward development is now the most discussed topic in the technical environment, and the reason is not only the breakdown of the level of 1.2250, but the entire turn of the direction from May 1. It turns out that in the structure of a month and a half flat, the downward movement is the largest in time and measure. There is a similar pattern in technical analysis, where it is said that if a flat has a significant temporal weight, and the current round is the largest, then the probability of a flat completion is high.
Analyzing the past minute by minute, you can notice the clock base, where a local upward movement arose during the European session, and the downward movement resumed at the start of the American trading session. In fact, this is a kind of repetition of the vibrations of May 12.
As discussed in the previous review, traders expected a breakdown of the 1.2250 / 1.2260 area, as a result of which short positions were opened in the direction of the subsequent value of 1.2150.
In terms of volatility, indicators above 100 points are fixed already for the sixth day in a row, and this is considered a high value and a sign of speculative interest in the market.
Considering the trading chart in general terms [the daily period], we see a one and a half-month flat at the notional peak of the inertial stroke of 03.20.20-14.04.20, where there are signs of a possible recovery of the downward movement.
The news background of the past day had a preliminary estimate of Britain's GDP for the first quarter, where the decline was -1.6% with a forecast decline of -2.1%. In some respects, the data came out better than the forecast, but the recession is a recession, and taking into account the fact that quarantine measures were introduced in Britain later than all the others, we will see the consequences.
Market reaction did not practically react to GDP.
The data on producer prices in the United States will be published in the afternoon, where they expected a decline of -0.5% and was -1.3% in the end, and this is a signal of possible deflation.
The reaction of the market to data from the United States was contrary to fundamental analysis, and the reason why investors think globally and what is now common for states is similarly displayed in other countries.
Almost synchronously with the US data, the head of the Federal reserve, Jerome Powell, spoke, who called the scale of the current crisis unprecedented.
"The scale and speed of the current economic downturn has no precedent, the current recession is significantly worse than any other that has been observed since World War II," Powell said during a speech at the Peterson Institute for International Economics on Wednesday.
Now, we understand that the consequences of the COVID-19 virus will drag the whole world into crisis, and we know from history that the United States always emerges from the crisis, but we should not expect a quick recovery in this case.
Returning to the external background of the United Kingdom, where they are trying so hard to restart the economy, the Ministry of Finance has already reported that the budget deficit could reach a record 337 billion pounds this year. If the economy does not recover, then the deficit may amount to 517 billion pounds.
Today, in terms of the economic calendar, the next batch of applications for unemployment benefits in the United States, where they expect a reduction in the number of initial applications compared to last week, but they still make up an immense number of 2,450,000. In turn, the number of repeated applications continues to set anti-records, where they may amount to 25,650,000, taking into account the new data.
Further development
Analyzing the current trading chart, we can see that the quote has almost reached a local minimum on April 7 - 1.2166, which means that the quote is probing the area of interaction of trading forces, which reflects the level of 1.2150. Market participants are literally on the edge of the cliff of the side range 1.2150 (1,2250) //1.2350//1.2620, since in the event of breaking through of the lower boundary, the restoration process will acquire a material basis, and this is very important in the integrity of the entire existing structure.
In terms of the emotional mood of market participants, we see that the rate of speculative operations continues to be at a high level, and if the level of 1.2150 falls, then this may be of interest to medium-term traders.
We can assume a temporary price fluctuation within the area of interaction of trade forces, where it is worth working both for rebound and breakdown, that is, for local and main positions. In the event of a rebound, we will continue to be within the flat, but this does not mean that the downward move will be interrupted. The main positions are considering the breakdown of the 1.2150 mark, where the subsequent movement will lead the quotation to the psychological level of 1.2000, and this will already be considered a recovery move along the trend.
Based on the above information, we derive trading recommendations:
- Selling positions should be considered lower than 1.2150, towards 1.2000.
- Buying positions should be considered in terms of local transactions, in the event of another rebound from the area of interaction of trade forces 1.2150 / 1.2180.
Indicator analysis
Analyzing a different sector of time frames (TF), technical tools on hourly and daily periods was seen that signal a sale, which corresponds to the general interest.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(May 14 was built taking into account the time of publication of the article)
The volatility of the current time is 60 points, which is considered a low indicator relative to the average daily value. We can assume that further increase awaits us in the event of a breakdown of the level of 1.2150.
Key levels
Resistance Zones: 1.2250; 1.2350 **; 1.2500; 1.2620; 1.2725 *; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support areas: 1.2150 **; 1.2000 *** (1.1957); 1.1850; 1.1660; 1.1450 (1.1411); 1.1300; 1.1000; 1.0800; 1.0500; 1.0000.
* Periodic level
** Range Level
*** Psychological level
**** The article is built on the principle of conducting a transaction, with daily adjustment
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