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From the point of view of a comprehensive technical analysis, we see a steady downward course, where sellers not only developed a previously formed bull rally, but managed to keep the main stream of positions on themselves. In fact, the psychological level of 1.3000, to which the quotation of some 59 points has not reached, already plays the role of support. At the same time, this very level [1.3000] embodies the ability to return quotes to lower values, which we saw a month earlier. Thus, it turns out that the potential of sellers is several times greater than the potential of buyers, and the previously set theory [in previous reviews] regarding the strong emotional background on which the quote pulled up is confirmed, otherwise we would not have seen such a remarkable mirror V-shaped model. Moreover, it's worth considering that the emotional background based on the information flow has not gone away. Therefore, impulses [chaotic price spikes] are still possible, but we already know the general interest of the market and it represents sellers. In terms of volatility, everything is fine, we still have pretty impressive indicators, and the average value since the beginning of the month is 120 points.
Analyzing the past hourly day, we see that the quotation came close to the local minimum on December 12, where there is a characteristic pressure on the quotation paired with the close proximity of the psychological level. Everything that happens is very similar to the regrouping of trading forces before the jump, and step-by-step consolidation [M30 timeframe] is a confirmation of this.
As discussed in the previous review, traders in the phase of regrouping trading forces began to actively consider new short positions, just below the level of 1.3100. Thus, it is worth considering that these positions themselves had a share of risk in connection with an impressive support, thereby using an incomplete trading volume per position.
Considering the trading chart in general terms [the daily period], we see a very remarkable pattern [December 13-17], which reflects a change in trading forces at high volatility. A pretty good signal, and perhaps the sellers will be able to develop it for their own purposes. In general terms, nothing has changed, the global trend is still downward but there is a medium-term phase of a possible fracture. In turn, the pound is under strong pressure under a separate consideration of economic issues, but not all of this pressure is seen, since the mind is clouded by emotions.
The news background of the past day contained data on inflation in Britain, where its level remained 1.5% while it was expected to decline to 1.4%.
The pound did not react to statistics, since the general background is putting pressure on the market.
In terms of information flow, we have exactly the same pressure in the face of uncertainty regarding the proposal of Prime Minister Boris Johnson to ban the extension of the Brexit transition period. So, the head of the European Commission, Ursula von der Leyen, was not inspired by Johnson's initiative, saying that Britain would suffer more than the EU in the case of a time shortage.
"The time frames put forward for us are extremely complex and we have a very limited time until the end of December 2020. If we can't conclude an agreement before the end of 2020, we can be on the edge of the abyss again. This will obviously harm our interests, but the negative effect for Britain will be greater than for us. After all, the European Union will continue to receive benefits from the single market, our customs union and from international agreements signed with our partners." said von der Leyen
In turn, the fading Labor leader Jeremy Corbyn of the last forces is trying to encourage members of the same party on Friday [December 20] to vote against the signing of Brexit. However, we understand that nothing will work out with the current situation in the British Parliament about Corbyn. Let me remind you that there is not much time left for Jeremy Corbyn due to the recent election failure and he will leave his post in March 2020.
Today, in terms of the economic calendar, we are waiting for statistics on retail sales in the UK, where a slowdown from 3.1% to 2.1% is expected, which may put pressure on the pound. After which, we have a meeting of the Bank of England, where you should not expect any changes regarding the refinancing rate, since it will remain at the same level - that is at 0.75%. What is most interesting is the comments of chapter by Mark Carney regarding further actions of the regulator. Let me remind you that earlier, Carney has already put aside the worst-case scenario due to the improvement of the climate on the Brexit issue. Nevertheless, the actions of the regulator after the transaction should be in favor of lowering the rate, and the question is how quickly these same actions will occur and on what scale.
Further development
Analyzing the current trading chart, we see a very remarkable consolidation. The amplitude of which is just over 20 points. In fact, we have a stop at which many opportunities are now spinning, due to the fact that the quotation is fully returning back to its original course. That is, consolidation is caution. It is possible that it is reflected from the psychological level of 1.3000, but there may be a surge that will just help break through the control level as soon as the trading forces exceed the boundaries of stagnation.
In terms of volatility, everything is just beginning, as yesterday's sluggish stagnation can help a new acceleration, which is just around the corner. The emotional mood of the market still distinguishes a high coefficient of speculative positions.
In turn, traders/speculators are considering a further decline in the direction of the psychological level of 1.3000 and below it. In view of the alternatives and local operations, a possible temporary upward surge is considered, if the price still manages to work out the control level.
Having a general picture of actions, it is possible to assume that if consolidation is still choked down. The psychological level of 1.3000 will be quickly reached and traders will begin a thorough analysis of fixation points for further operations.
Based on the above information, we derive trading recommendations:
- Buy positions are considered in the form of local operations in the case of fixing the price above 1.3100.
- Traders are already making sell positions with part-time trading, considering the prospect of a decline to 1.3030-1.3000. Further transactions are considered after fixing the price below 1,300.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that the indicators on all major areas have taken the downward side, which is a good signal. It is only worth considering that short-term intervals can give a variable signal in connection with consolidation.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for Month / Quarter / Year.
(December 19 was built taking into account the time of publication of the article)
The volatility of the current time is 19 points, which is an extremely low indicator for this time section. It is likely to assume that the breakdown field of consolidation, paired with the information background, may accelerate volatility.
Key levels
Resistance zones: 1.3180 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Areas: 1,3000; 1.2885 *; 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
*** Psychological level
**** The article is built on the principle of conducting a transaction, with daily adjustment
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