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For the first time in a long time, the pound / dollar currency pair showed high volatility. So, what was the reason for the surge and how it affected the overall movement? - we will answer these questions in our article
From the point of view of technical analysis, we see an amazing rally of 118 points directed upward, where the quotation with a surgical accuracy worked out the range level of 1.2770 [1.2750 / ( 1.2770) / 1,2800] once again. Let me remind you that for eleven trading days in a row the market tormented us with extremely weak volatility [58 -> 65 -> 97 -> 62 -> 75 -> 45 -> 67 -> 58 -> 53 -> 83 -> 53 points], which fully reflected the indecision of market participants to action, at the same time, escalating the intrigue - but what will all this lead to? All this led to a surge in long positions, but what has changed is nothing! The movement within the two levels of 1.2770 / 1.3000 remains to this day, which, on the one hand, is bad, and on the other, it is good. Thus, the dark side reflects to us that we are not moving anywhere. The price at the peak of the inertial course formed a flat, where the main movement will resume only when the borders fall. The bright side of the existing fluctuation is that on such a wide range, you can earn quite well. Now, returning to the existing movement again, in the range of 1.2770 / 1.3000, you should pay attention to the peaks on October 21 and 31 [chart H4]. Theoretically, there is a downward cycle in the structure of the channel, but so far there is little data. The main theory is formed around the horizontal course [flat], where we have already received repeated confirmations and the current resistance point, in the structure of yesterday's impulse there were just coordinates representing 50% [1.2885] relative to the boundaries of 1.2770 / 1.3000.
Analyzing the past hourly hour, we see a progressive upward move from the level of 1.2770, where the main jump occurred in the period 9:00-11:00 [UTC+00 time on the trading terminal]. We will analyze the cause and effect of the jump a little later.
As discussed in the previous review, traders were not eager for hasty actions. Their main task was to evaluate the future movement and understand what would happen next - a rebound or breakdown relative to the key level of 1.2770. The task in terms of monitoring the values of 1.2750 / 1.2800 paid off, and as soon as the quotation moved to fixing on the range 1.2830-1.2840, there was a gulf of long positions, which almost immediately reflected the profit on the trading deposit. A partial and full exit was already made in the mid-flat region [1.2885]. Trading tactics and forecast coincided 100%, thus, congratulate everyone on the next profit!
Considering the trading chart in general terms [the daily period], we do not see any cardinal change. All movement is still concentrated within the boundaries of 1.2770 / 1.3000. A relatively global trend are all unchanged and the trend is downward.
Moreover, the news background of the past day contained preliminary data on UK GDP for the third quarter, where the slowdown in economic growth was from 1.3% to 1.0% with a forecast of 1.1%. In turn, the data on industrial production in Britain keep the decline to -1.4%.
Market reaction to statistical indicators was practically absent due to pressure from other factors.
So what triggered a surge in pound sterling?
The Brexit party boosted Prime Minister Boris Johnson's chances of a majority victory following a statement that the Brexit party would not fight to oust the conservatives in the UK general election on December 12. Against this background, the pound sharply rushed up.
"In a sense, we now have an alliance of supporters of the country's exit from the EU. We decided to put the country's interests above party interests and fight the Laborites." said Nigel Farage, leader of the Brexit Party.
Farage also added that he does not have much love for the Conservative Party, but wants to give Johnson a chance.
In turn, Boris Johnson said: "I am glad that there is recognition that there is only one way to make Brexit, and that is to vote for us and vote for the conservatives".
Today, in terms of the economic calendar, we have data on the UK labor market, where the unemployment rate is expected to remain at the same limits of 3.9% as the level of wages, taking into account [excluding] bonuses. At the same time, they are waiting for the publication of data on orders for unemployment benefits, where, depending on the sources, the indicators vary. Thus, some predict a growth of 3 thousand, while others, on the contrary, decrease by 1 thousand.
Further development
Analyzing the current trading chart, we see that after the last surge in prices, the quote was under local overbought, slowing down the move and, as a fact, forming a stagnation with a pullback, which for a while focused on the values of 1.2845 / 1.2866. In fact, we have worked out two values: the first is the lower boundary of the range in the face of the level of 1.2770, the second is the value of 1.2885, the middle of the range is 1.2770 / 1.3000, which is the mirror level in everyday life.
In terms of volatility and emotional mood, we have temporary restraint, but this more reflects the waiting process.
By detailing the per minute movement, we see that the stagnation during the Pacific and Asian trading sessions led to the formation of an excellent platform [market slowdown], which many people paid attention to. With the advent of Europeans, bursts of activity appeared in the market, which led to the shooting of morning accumulation.
In turn, traders at the mirror level of 1.2885, as well as during the period of morning stagnation, switched to partial and full fixation of previously received profit from long positions.
Having a general picture of actions, it is possible to produce a number of scenarios: The first one considers the reverse process, that is, referring to the fact that the past impulse was against the background of emotions and there is already working out a mirror level of 1.2885, the quote can return back to 1.2800 / 1.2770. The second scenario considers further movement towards the upper border of the flat, but in this case, we need a clear price fixation higher than 1.2885 / 1.2895.
Based on the above information, we derive trading recommendations:
- Buy positions are considered in the region of 1.2885 / 1.2895, with a prospect of 1.2950-1.3000.
- Sales positions are considered in the range of 1.2840-1.2830, with the prospect of a move to 1.2800 / 1.2770.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that due to the recent surge in indicators, the indicators are in a fever. Thus, the intraday perspective took the upside, which is justified in terms of working out the bottom border of the flat. Meanwhile, the medium-term outlook holds back the attempt to break the 1.2770 border, but the indicators are on the verge of a change of interest. Short-term periods, in turn, randomly jump due to stagnation / pullback.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(November 12 was built taking into account the time of publication of the article)
The current time volatility is 26 points, which is a low indicator for a given time interval. It is likely to assume that there is still a chance of accelerating volatility as soon as we see a full way out of morning stagnation.
Key levels
Resistance Zones: 1.3000; 1.3170 **; 1.3300 **.
Support areas: 1.2770 **; 1.2700 *; 1.2620; 1.2580 *; 1.2500 **; 1.2350 **; 1.2205 (+/- 10p.) *; 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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