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At the end of the last trading week, the pound / dollar currency pair showed a reduced volatility of 65 points, but this was enough to interest speculators. From the point of view of technical analysis, we see that a steady downward interest led us to the fact that the quotation managed to go below the level of 1.2350, and then going down to the level of 1.2270, where there was a slowdown. If we compare the breakpoints with the history, we will see that there is a coincidence with the coordinates 1.2283 (minimum rollback of September 12), where in fact, the bodies of the current candles found a fulcrum - see chart H4.
As discussed in the previous review, Friday morning was very profitable for speculators, the price jump from 10:00 to 10:35 (time on the trading terminal) led to an impulsive move due to the informational background, where sales positions were opened, and they were also quickly closed. Further actions were in terms of waiting since the probability of a stop or a rollback was high, which in fact has already happened.
Considering the trading chart in general terms (the daily period), we see that the process of quotation recovery almost reached 50% of the oblong correction, but this is still not enough to fully talk about the restoration of the global downward trend. I remind you that the fulcrum of the oblong correction is in the region of 1.1957 / 1.2000, thereby we should see at least 70-80% of development.
Meanwhile, Friday's news background contained data on orders for durable goods in the United States, where they forecast a decline of 1.1%, but as a result received an increase of 0.2%. Naturally, this kind of statistics supported the American dollar, and the quote managed to gain a foothold at current levels without a significant pullback, after an impulse move.
In turn, the news background was thrilled by a statement by Michael Saunders, member of the Bank of England's Monetary Policy Committee. Therefore, the representative of the Central Bank said that regardless of the outcome of Brexit, the Bank of England may need to lower interest rates. Saunders added that even if a country comes out with a deal, a high level of uncertainty will remain, which will continue to put pressure on the British economy.
"In this case, it may well be appropriate to maintain a very stimulating monetary policy for a long period and possibly soften the policy at some stage, especially if global growth remains disappointing," Michael Saunders
According to the Lloyds business barometer, UK businesses are becoming increasingly gloomy with respect to the economy as Brexit approaches. Thus, the level of optimism in September fell to the level of the 2016 referendum. A negative impact of Britain's exit from the EU is expected by 43% of enterprises compared with 39% a month earlier. (The survey was conducted among 1200 companies).
In turn, there is a new uproar regarding the impeachment of Prime Minister Boris Johnson. So, the opposition in the British parliament is discussing the possibility of considering the beginning of the impeachment procedure this week. If the House of Commons approves the initiative, Johnson could face litigation.
Today, in terms of the economic calendar, we are waiting for the final data on Britain's GDP for the second quarter, where, referring to a preliminary estimate, we will see a slowdown in economic growth from 1.8% to 1.2%. At the same time, we will see data on the volume of commercial investments, which are reduced by 1.6%, as well as a decline in lending. As you know, statistics for the UK do not carry anything good for the pound sterling.
Great Britain 9:30 London time. - GDP YoY 2Q: Forecast 1.2%
Great Britain 9:30 London time. - Total commercial investment (YoY) (Q2): Forecast -1.6%
Great Britain 9:30 London time. - Number of Mortgages Approved (Aug): Prev 67.31K ---> Forecast 66.17K
Great Britain 9:30 London time. - Mortgage Loan Amount (Aug): Prev 4.61V ---> 3.70V Forecast
Further development
Analyzing the current trading chart, we see a characteristic amplitude fluctuation within the recent pivot point. The shutdown process itself is very reminiscent of the accumulation process due to the regrouping of trade forces, where the expansion of existing borders is theoretically possible. In turn, speculators take a waiting position, tracking the behavior of quotes relative to the levels of 1.2270 / 1.2350.
It is likely to assume that the accumulation process will continue for some time, where the boundaries may be expanded to the limits of 1.2270 / 1.2350, that is, a return to the previously passed level. The principle of building a trade in this case is to wait for the previously designated boundaries, since working within the framework may carry unjustified risk.
Based on the above information, we concretize trading recommendations:
- We consider purchase positions in the case of a clear price fixing above the level of 1.2350, preferably with a yield of 1.2390.
- We consider selling positions in case of price fixing below the local minimum of Friday 1.2270, with the prospect of a move to 1.2150.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that indicators on short-term intervals alternately signal upward interest due to accumulation. On the other hand, the intraday and medium-term outlook focuses on the recovery process, reflecting a downward interest.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(September 30 was built taking into account the time of publication of the article)
The volatility of the current time is 30 points, which is a low indicator for this time section. It is likely to assume that as soon as the accumulative process falls, volatility will accelerate many times, possibly exceeding the average daily indicator.
Key levels
Resistance zones: 1.2350 **; 1.2500 **; 1.2620; 1.2770 **; 1.2880 (1.2865-1.2880) **.
Support areas: 1.2150 **; 1,2000 ***; 1.1700; 1.1475 **.
* Periodic level
** Range Level
*** The article is built on the principle of conducting a transaction, with daily adjustment
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