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The rapid upward movement in the euro/dollar currency pair still ended after market participants reached the psychological level of 1.2000, where a slowdown occurred on a natural basis, which resulted in a reversal in the correction phase.
An event in the form of a slowdown was expected in the market. The level of 1.2000 balanced the trading positions, where fixations appeared, followed by stabilization in the form of a correction. In this case, it was necessary to analyze the boundaries of the deceleration for the strength of trading forces, which many traders did before making a trading decision.
In the course of the correctional movement, speculation arose due to the local overbought of the European currency, where the quotation dropped to the area of interaction of trade forces at 1.1900 / 1.1930, known in the market as the upper border of the previously passed flat 1.1700 / 1.1810 / 1.1910.
Analyzing the last trading day of M15 TF, you can see that the surge in short positions occurred in the period 13:15-17:00, that is, with the supply of American traders.
In terms of daily dynamics, another acceleration is recorded by 28% relative to the average level of 85 ---> 109 points. The high level of volatility has been taking place in the market for the fourth day in a row, which indicates a high ratio of speculative transactions.
As discussed in the previous review, traders were guided by a slowdown within the psychological level of 1.2000 (1.1960/1.2000), where, as a result, selling will be considered after the price consolidates below 1.1950.
Considering the trading chart in general terms (daily period), it can be seen that the psychological level of 1.2000 plays the role of a conditional border for buyers, and until it is broken through, a reverse move to the area of the previous flat is not excluded.
Yesterday's news background contains data on Europe inflation, where price increase of 0.4% was replaced by a decline of -0.2%, which became a signal of deflation in the EU. At the same time, they published the unemployment rate in the EU, where they recorded an increase from 7.7% to 7.9%.
Investors are scared, and American traders take advantage of this. As a result, we see a decline in the European currency.
The statistics for the United States came out a little worse than the forecast. Here, the PMI in the manufacturing sector rose from 50.9 to 53.1 against the forecasted 53.6, but this did not prevent the dollar from continuing to strengthen.
In terms of the information plan, we had a speech by the Vice President of the ECB, Luis de Guindos, who said that the eurozone economy is experiencing a strong recovery in the third quarter.
"The third quarter saw a significant increase in economic activity. The data for July was very good and there was a slight decline in intensity in August," Guindos said.
It should be noted that his speech was before the publication of data on inflation in Europe.
In terms of the economic calendar, we have data on producer prices in Europe today, the rate of decline of which may slow down from -3.7% to -3.5%, which may have a positive effect on inflation in the next period, that is, a slow recovery may give hope to investors, which will lead to an increase in the Euro.
Traders are eagerly waiting for ADP's US private sector employment report for August in the afternoon, which predicts employment growth of 950,000.
An increase in this indicator has a positive effect on consumption, stimulating economic growth and strengthening the dollar, while a decline weakens the dollar.
It is worth considering that there were cases when the market ignored fundamental analysis and followed the speculators' emotions.
Further development
Analyzing the current trading chart, you can see that the corrective movement yesterday is moving to a new level. A consolidation below 1.1880 indicates dominant speculative interest, which could lead to a slide towards 1.1810-1.1780.
An alternative scenario will be considered if the price returns above 1.1925, which will indicate the resumption of the upward trend of 1.1965-1.2000.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on the minute and hourly intervals signal sell due to the correction process. The daily periods, in turn, signal buy by renewing highs.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The volatility measurement reflects the average daily fluctuations, calculated per Month / Quarter / Year.
(It was built considering the publication time of the article)
The volatility of the current time is 64 points, which signals a high speculative interest at the start of the European session. It can be assumed that the given mood will still remain in the market, which will lead to further growth in activity.
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 ***.
* Periodic level
** Range level
*** Psychological level
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