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From the point of view of complex analysis, we can see a surge in speculative positions, which partially recovered the US dollar.
Last trading week, for the first time in such a long time, managed to raise the pound to the area of 1.2770, where everyone, without exception, started talking about serious changes, including the change in fluctuations from 1.2150 // 1.2350 // 1.2620 to 1.2770 // 1.3000 // 1.3300. Everything would have been within the framework of execution, if not for one "BUT", which is a movement of more than 650 pips and a duration of 13 trading days, where there were no corrections and pullbacks due to scale and time.
Thus, the long-awaited correction occurred, where market participants actively traded long positions, and speculators, against the background of a sharp overheat, switched to a bearish mood, where the level 1.2770 played an excellent role in resistance.
Analyzing the past two trading days [June 11 and 12] in detail, we should highlight the intensity of short positions that were expressed in a strong downward movement, in which the quotes surged downward, followed by a new wave to the level of 1.2500 . The total recovery is a little over 300 pips, which is half of the entire movement.
With regards to further movement, there are two paths that traders can follow. First is within the main trend, where market sentiments and speculations can occur, but the global trend is not violated. The second goes in step with the global trend, where fast changes are not expected, but market tacts are closely monitored.
At the moment, traders are working on local positions, due to the strong market sentiment that caused impulses the size of a medium-term trend.
Nevertheless, despite all this surge in activity, the global trend remains unchanged.
In terms of volatility, a 37% acceleration in activity was recorded, relative to the average daily dynamics. The coefficient of speculative positions had a high indicator on Thursday and Friday of the past week, which is confirmed by volatility.
[See volatility table at the end of the article]
Looking at the daily chart, we can see the market changes that led to a shift in tacts in the region of historical lows.
Meanwhile, the news published last Friday contained a wide range of statistics in the United Kingdom, where the effects of the coronavirus crisis were already impossible to hide. Thus, according to data, UK GDP depressingly shrank into a deep minus, losing -24.5%, much deeper than the forecast of -22.3%. The volume of industry also fell to -24.4% in April, while the volume of construction dropped to -44.0%. Such figures were new historical anti-records, but according to the Bank of England, the regulator was already ready for such a turn. The most important points are the figures and levels in the future.
"The figures are obviously dramatic and big, but this is not surprising, since the economy clearly closed at the end of March and in April," said Andrew Bailey, Governor of the Bank of England.
With regards to Brexit, Minister for the Cabinet, Michael Gove, said that England would by no means extend the transition period, even with stalled negotiations on a trade agreement.
"I just had a constructive meeting with the Vice President of the European Commission, Maros Shefchovich. I have officially confirmed that Britain will not extend the transition period. The moment for the extension has already passed. Starting January 1, we will regain control and restore our political and economic independence, "Gove wrote on Twitter.
UK's decision may again affect the market sentiment, and may lead to a sharp decrease in the pound.
There are no important macroeconomic news in the UK and the US today, so the attention of traders will particularly focus on technical and information news.
Further development
Analyzing the current trading chart, we can see the fluctuation of quotes within the level of 1.2500, where a range from 1.2475 to 1.2545 was formed, which allows market participants to regroup trading forces. The recovery process will continue, depending on speculative interest, as local positions are the most relevant at the moment, especially against the current market sentiment.
Fluctuations within the range of 1.2475 / 1.2545 may still remain on the market for quite some time, thus, the best option for trading at the moment is breaking out from the established boundaries.
Based on the above information, we present these trading recommendations:
- Buy positions after a consolidation above 1.2550, towards 1.2620.
- Sell positions if the quotes consolidate lower than 1.2450, towards 1.2350.
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that the indicators of technical tools relative to hourly periods took a bearish position due to the intense inertial movement. The sections of the daily period, on the other hand, are still focused on the earlier movements, giving a buy signal, but the indicators are already on the verge of a change from BUY to NEUTRAL.
Volatility per week / Measurement of volatility: Month; Quarter Year
The measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(June 15 was built, taking into account the time of publication of the article)
The volatility of the current time is 46 points, which suggests that the market is still warming up. It is assumed that once the quotes breakout from the variable range, market activity will increase significantly.
Key levels
Resistance zones: 1.2620; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 1.2500; 1.2350 **; 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 based on the principle of conducting a transaction, with daily adjustments
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