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Yesterday, the EUR/USD pair successfully showed an increased activity, where the recent stagnation area located at 1.1800/1.1830 served as a resistance.
The downward movement and the strength of the course was an expected phenomenon based on a number of natural facts listed below:
- Systematic interaction of trading forces within the price level of 1.1810.
- A sharp activity slowdown on October 12. The daily dynamics was only 39 points, which was considered unusually low.
From the point of view of technical analysis, these are direct trading signals that the market can reverse as well as accelerate.
From the point of view of fundamental analysis, the news on US inflation was in favor of the strengthening of the US dollar, which was reflected in its growth – from 1.3% to 1.4%.
Relative to the current location of the quote, you can see another logical basis associated with price levels. So, during the period of sharp decline, market participants came to the area of 1.1725/1.1750, where there was a natural stop in the market last October 7 and 8. And unlike the price area of 1.1800/1.1830, the range of 1.1725/1.1750 is not very important, which means that the chance of its breakdown in the downward direction is quite high.
Based on the location of the quote and the behavior of market participants, it is possible to make a forecast from several possible market development scenarios.
First, a breakdown.
As mentioned earlier, the area of 1.1725/1.1750 is not very important, which means that there is a chance of a breakout in the market. In this case, you should see the price consolidating below 1.1725, which will indicate a local movement towards 1.1700-1.1695.
Second, a prolonged stagnation.
Market participants refrain within 1.1725/1.1750, which led the speculative transactions to form. In this case, the trading tactic follows a simple method – breaking the established borders, in our case, the range of 1.1725/1.1750.
In the first version, it was a breakdown of the lower border, but now it is a breakdown of the upper border. Price consolidation above the level of 1.1755 leads to a local movement towards 1.1755.
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