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From the point of view of complex analysis, we can see that the pair works on the levels of the main flat formation. Now, let's get to the details. The trading week is coming to an end. It is time to draw conclusions. Over the past days, the quote has built the third consecutive upward tact in the structure of the flat formation at 1.0775/1.1000, where the psychological level was reached. The scale of recovery is hardly noticeable yet. However, the price reached the 1.1000 mark twice which says a lot.
Analyzing the past trading day in details, you can see that during the European session there was an upward trend during which the quote managed to reach the upper border of the flat [1,1000]. At the start of the American trading session the pair reached the 1.1000 level. Eventually the quote reversed and formed an intense downward movement, which, in turn, coincided with the publication of statistics in the United States.
As for the theory of medium-term development, we are still considering a downward movement after the completion of the flat formation. However, the quote needs to consolidate below 1.0775 sending the quote to the 1.0700 mark.
As it was mentioned in the previous review, traders are considering working out the 1.1000 border in a downward direction where it is better to open short positions below the 1.0950 level.
The trading recommendation from Thursday was similar. Therefore, the level of 1.0950 was indicated in the signal.
[It is better to consider selling the pair lower than 1.0950 ...]
In terms of volatility, you can see that the trading week has had a steady high indicator of activity, an average of 88 pips, which corresponds to the average daily value.
Analyzing the trading chart in general terms, the daily period, it is worth noting that the side channel has significant scales. It means that the side channel will be completed soon. Bear in mind that the medium-term and long-term trends have a downward slope which means that the chance of a breakout of the lower border of the flat is higher than of the upper border.
Yesterday, the preliminary EU business activity index was published. The services PMI increased to 28.7 from 12.0, while the manufacturing activity grew to 39.5 from 33.4. Meanwhile, the composite index advanced to 30.5 from 13.6.
The market did not react to the publication of European PMI data, possibly due to the fact that several EU countries, including Germany and France, celebrate the Ascension Day. Thereby, trading volumes were reduced.
Later yesterday, the US PMI data was published. The services business activity increased to 36.9 from 26.7 exceeding economists' forecast. The manufacturing PMI grew to 39.8 from 36.1.
As a result, the greenback strengthened amid positive market reaction to the US business activity data.
Apart from that, it is better to focus on the weekly data on the number of applications for unemployment benefits in the United States. Thus, the secondary filings reached 25,073,000, while the number of initial applications has been decreasing for weeks. The number of first-time jobless claims mounted to 2,438,000.
Today, in terms of the macroeconomic calendar, no important statistics from Europe and the United States are expected. However, the minutes of the ECB meeting on monetary policy will be published during the day. There is nothing to expect from the report since everything has already been known before.
The upcoming trading week will begin with a day off in the United States. However, the macroeconomic calendar next week is expected to be empty. The only interesting events on Thursday and Friday will be preliminary EU inflation data and US GDP. The external background is still high and almost constantly attracts the attention of market participants.
The most interesting events displayed below --->
Monday, May 25
US - Memorial Day
German GDP for the first quarter
Tuesday May 26
S&P/Case-Shiller 20-City Composite Home Price Index seasonally adjusted for March
US new home sales for April
Thursday, May 28
US jobless claims for unemployment benefits
Preliminary US GDP for the first quarter
US durable goods orders for April
US pending home sales for April
Friday May 29
EU Inflation (preliminary)
Preliminary US wholesale inventories for April
Further development
Analyzing the current trading chart, we can see that a new trend is forming from the upper border of the flat formation where the quote has already overcome the low as of May 20. It means that the price is likely to reach the lower border. Regarding short-term prospects, we continue to consider the movement within the boundaries of the flat where it is better to carefully monitor the price fixing points relative to the specified levels of 1.0775/1.1000. As for the medium term, we are considering a downward development. A breakout at the 1.0775 level may occur.
Here are trading recommendations based on the above information:
- Traders are holding their sell deals from the 1.0950 level towards 1.0900-1.0850-1.0775.
- It is preferable to open buy deals if the downward activity drops sharply at this stage and the quote once again returns to the level of 1.0950 and consolidates above it.
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that technical tools on the hourly chart changed to a downward trend due to the recovery process. Daily time areas are temporary indicating the upward trend.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation calculated for Month / Quarter / Year.
(On May 22, volatility has been formed taking into account the time of publication of the article)
Currently, the volatility is 40 pips which is already a lot for the start of the European session. It can be assumed that the development of a new trend will lead to the retention of high volatility indicators.
Key levels
Resistance zones: 1,1000 ***; 1.1080 **; 1,1180; 1.1300; 1.1440; 1.1550; 1.1650 *; 1.1720 **; 1.1850 **; 1,2100
Support areas: 1.0850 **; 1.0775 *; 1.0650 (1.0636); 1,0500 ***; 1.0350 **; 1,0000 ***.
* Periodic level
** Range Level
*** Psychological level
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