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After a short fluctuation above the side channel 1.1700 // 1.1810 // 1.1910, the quote returned to its previous range, showing increased activity of short positions. This is mainly due to the recent surge in speculative activity caused by the instability of the US dollar, which was recently oversold in the market.
A technical correction is actually already been expected, but a jump from short positions is not enough for a correction since a small scale will not lead to a significant change in the trend. A pullback in quotes is much more suitable for the market.
Thus, if we analyze the past trading day by the minute (M30), we can see that a round of short positions arose from 15:00 and lasted until the end of the trading day, during which the quote consolidated at the level of 1.1830 ...
The same thing also occurred in the British pound, with which the dynamics of the change is highly similar.
It resulted in a 122-point volatility, which is 41% higher than the average level.
In addition, traders also followed the strategy discussed in the previous review , where decisions were made on the basis of a price drop in the range 1.1920 / 1.1965, where market participants worked on a breakout from the established limits. It gave an impressive profit to investors.
Meanwhile in the daily chart, only 35 pips remain until the arrival to the psychological level of 1.2000. Based on the technical analysis, the average deviation of the psychological level is 50 points.
News published yesterday included data on Eurozone inflation, which grew from 0.3% to 0.4%, as was expected. Perhaps, it was due to this background that there was a delay in short positions.
Nonetheless in the evening, the publication of the latest Fed protocol increased demand for the US dollar, mainly because the members expressed opinion that the US economy is likely to need additional support, but did not mention when they will start using new tools.
In addition, concerns about the second wave of coronavirus was also discussed, as such could lead to a prolonged period of low economic activity in the United States.
Today, data on the US labor market will be released, where reductions on unemployment claims are expected again. Forecasts say that repeated applications may decrease by 486 thousand, from 15,486,000 to 15,000,000, while initial claims may decline by 38,000, from 963,000 to 925,000.
If such a scenario really occurs, the US dollar may resume its rise in the market.
Further development
Analyzing the current trading chart, we can see that the quote continues to show downward activity, where the average level of the side channel 1.1700 / 1.1810 / 1.1910 has become on the way.
Thus, it can be assumed that if the given mood persists and the price consolidates below the level of 1.1800, the downward move may lead the quote towards the lower border of the 1.1700 flat.
However, an alternative scenario may develop if the price consolidates instead below 1.1800 in the four-hour chart, and such could lead to a pullback towards the price level of 1.1865.
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that the indicators in the minute and hourly period signal sell due to a sharp jump in activity on the side of short positions. Meanwhile, the daily period signals buy, but there is a chance of changes in indicators.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(August 20's was built, taking into account the time this article is published)
Volatility is currently 56 points, which is 34% below the average daily value. And if the current speculative mood persists, dynamics may increase even further.
Key levels
Resistance zones: 1.1910 **; 1.2000 ***; 1.2100 *; 1.2450 **; 1.2550; 1.2825.
Support Zones: 1,1800; 1.1650 *; 1,1500; 1.1350; 1.1250 *; 1.1180 **; 1.1080; 1.1000 ***; 1.0850 **; 1.0775 *; 1.0650 (1.0636); 1.0500 ***; 1.0350 **; 1.0000 ***.
* Periodic level
** Range level
*** Psychological level
Also check the brief trading recommendations for the EUR / USD and GBP / USD pairs here .
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