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From the point of view of complex analysis, you can see a sharp surge in activity, which led speculators, and now let's talk about the details.
The four-day stagnation subsided, replaced by the expected surge of activity, but the questions remained. So, the area of 1.2150/1.2180 still stood, where low dynamics played the role of a catalyst for trading forces, attracting excessive attention among speculators. As a result, there was a surge in long positions, where in just a short period of time, the quote managed to overcome the area of interaction of trading forces of 1.2240/1.2280, and then the maximum on May 19. Speculators did not stop there, the quote continued its upward movement, returning the quote to the level of 1.2350, which at one time played the role of the average deviation in the side channel 1.2150//1.2350//1.2620.
As it turns out, the quote returned to the dynamics of moving within the flat formation again, it is theoretically true, but in fact the side channel [1.2150 // 1.2350 // 1.2620] has already been broken, which means that the clock component has changed.
In this situation, there are even more questions. There is a flat, as it were, but it is already gone, so where is the activity of long positions? There is an assumption that the surge has a market character that reflects the local sale of the US dollar, which was already mentioned in yesterday's review on the EUR/USD pair, where the dynamics of the weakening of the USD across the entire currency market was detected.
It turns out that, based on the theory of the sale of the US dollar, the theory of downward development is still relevant in the medium term.
Analyzing the past trading day in detail, you can see that the upward trend arose at the opening of the daily candle, but the main acceleration came from the start of the European session. Touching the level of 1.2350 and the subsequent pullback occurred already during the American session.
In terms of volatility, an acceleration of 35% is recorded relative to the average daily indicator, but if we consider the dynamics relative to the past four days, the acceleration in this case is 196%.
As discussed in the previous review, traders were ready for a similar development, therefore, positions for buying higher than 1.2200 were laid on Monday. Profit took place in the region of 1.2280, but mentioning that upward interest may continue, it will be possible to enter the market at 1.2310, with a profit of 1.2350.
The news background of the past day contained data on the real estate market in the United States, where expectations did not coincide with the forecast. So, the S & P/CS Composite-20 composite housing price index on an annualized basis increased from 3.5% to 3.9% in March with a forecast of a slowdown to 3.0%, while sales of new homes in April showed a growth of 0. 6% when they predicted a reduction of 21.1%.
Unexpectedly, you will agree, but the market reaction was literally absent.
In terms of the general informational background, we see regular comments regarding a possible negative rate by the Bank of England. This time, the chief economist of the British Central Bank, Andy Haldane, said that the regulator has not decided on this step at the moment, we are at the assessment stage. However, he noted that the Bank of England is still far from this decision to switch to negative rates.
The words of the chief economist forced traders to shift forecasts regarding the negative rate from the end of this year to the middle of 2021.
Today, in terms of the economic calendar, we do not have statistics for Britain and the United States, thereby analyzing the external background and technical elements.
Further development
Analyzing the current trading chart, we can see the process of rebound from the level of 1.2350, where the quote has already managed to return to the maximum level on May 19. In this situation, there is a chance of a reversal move, but first you need to consolidate the quote below 1.2280. In this case, the return of the price to the value of 1.2150 will be a signal of stabilization of the previously set downward measure [of May 1].
In terms of the emotional mood of the market, a high coefficient of speculative operations is still recorded, which can positively play on volatility.
It can be assumed that a pullback from the level of 1.2350 will grow into something more if the price consolidates below 1.2280. An alternative scenario will be considered in case of price consolidates above 1.2350, which will be a signal of the resumption of amplitude within the framework of an earlier flat formation.
Based on the above information, we derive trading recommendations:
- We consider selling positions lower than 1.2280, with the prospect of a movement to 1.2250 and 1.2150 / 1.2180.
- We consider buying positions in case of price consolidating above 1.2360, with the prospect of a movement to 1.2420-1.2450.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments on hourly and daily periods indicate an upward interest, for price consolidation above the maximum of May 19. Indicators may return to their original course if the pullback develops into the recovery phase.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(May 27 was built taking into account the time of publication of the article)
The current time volatility is 48 points, which is still considered a low value relative to the average daily indicator. It can be assumed that speculative interest can still disperse activity against the background of recovery.
Key levels
Resistance zones: 1.2350 **; 1.2500; 1.2620; 1.2725 *; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Areas: 1.2250; 1.2150 **; 1.2000 *** (1.1957); 1.1850; 1.1660; 1.1450 (1.1411); 1.1300; 1.1000; 1.0800; 1.0500; 1.0000.
* Periodic level
** Range Level
*** Psychological level
**** The article is built on the principle of conducting a transaction, with daily adjustment
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