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Over the past trading day, the Pound / Dollar currency pair set an absolute record, reaching 239 points in terms of volatility, where the merit of this event lies on the shoulders of Brexit.
From the point of view of technical analysis, we see not just any price spikes, but a full-fledged rally. First, let's look at everything that is happening from a bird's eye view, and there, by the way, there is a vertical growth from October 10, following the results of some crazy figures of 783 points. That is, the quote literally made its way almost to the subsequent psychological level of 1.3000 in some six trading days. The emotions of market participants - this is what we have seen throughout the week. Whether the technical analysis [TA] functioned in this interval is no more than yes, but in support of the TA, I will say that it certainly helped us to identify the most optimal accumulations and stops in order to make the most profitable transactions.
Analyzing the hourly past day, we see an inverted V-shaped oscillation, where the total up / down movement was about 235 + 231 = 466 points. That is, the main fluctuations were recorded in the period 7:00 - 12:00 [UTC+00 time on the trading terminal], after which a gradual slowdown in terms of regrowth.
As discussed in the previous review, speculators worked according to the situation. For example, morning operations were lowering towards the level of 1.2770, in the phase of partial recovery. The daily interval worked on the principle of monitoring a news feed, where there were jumps both up and down. Speculators, in turn, are extremely pleased with the existing process, since such behavior and a direct reflection of the background to the market are not often found. The total profit can be envied and congratulated by persistent speculators.
Considering the trading chart in general terms [the daily period], we see that the quote went over 1000 points from the fulcrum in the face of historical lows [1.1957], which speaks not only of a prolonged elongated correction, but of the possibility of a change in trend global review. There is one "BUT" here, and what is meant by global consideration? - in this case, the intervals are 1-1.5 years, since if you look at the general trading chart, for example, over 11 years, a change in quotation by 1000 points does not play a significant role when the pound falls from 2.1100. Thus, the reference point for considering a possible fluctuation is taken from the period 2017-2018, where there was the last change in movement.
On the other hand, the news background of the past day contained data on retail sales in the UK, where we got an acceleration of up to 3.1%, but the previous figures were revised for the worse 2.7% ---> 2.6%, and the current indicator was worse than forecast. The reaction of the pound to statistical data was absent due to such a strong information background. In fact, we have a dense curtain in the background, where statistics are in the background, but is it not possible that the euphoria of market participants subsides. All come to their senses and indicators in the form of a large coma will have that underexposed effect on the pound.
The information background was completely immersed in the divorce process, where, without exception, all fluctuations were sharpened only on it. Thus, several days of tireless work by the negotiators bore fruit. The EU and Britain, nevertheless, agreed on the text of an additional protocol on Ireland and Northern Ireland on 100 pages and a political declaration on 25 pages. These documents became an annex to the 580-page Brexit Agreement, which was adopted in December 2018. This is the first significant achievement of Prime Minister Boris Johnson, who tweeted, @BorisJohnson: "We have a new wonderful deal, which aims to regain control of the situation. Now, Parliament must bring Brexit to the end on Saturday so that we can move on to other important topics, such as the cost of living, the healthcare system, crime, and the environment."
The joy was not so long, and almost immediately a river of criticism poured into the new agreement. So, the first was launched by the Minister of Scotland, Nicola Sturgeon, who stated that the Scottish National Party would not vote for the agreement.
"It seems to me that no one who voted against the deal proposed by Theresa May ... will not vote for this option, which makes Brexit even less attractive. The Brexit cancellation option always remains an alternative to this deal. "- Twitter Nicola Sturgeon @NicolaSturgeon
After that, the leader of the Labor Party, Jeremy Corbyn, took the baton and succinctly stated that the agreement was even worse than it was.
"Judging by what we know, the prime minister has agreed on an even worse deal than Theresa May, who was rejected by an overwhelming majority," said Jeremy Corbyn.
Now, we understand the reason for the inverted V-shaped oscillation with a total up / down movement of 235 + 231 = 466 points. But then, positive emotions turned into negative "V" results.
Today, in terms of the economic calendar, we do not have statistics on Britain and the United States, but they are not necessary. The market in the face of the crowd will digest the available information and think about what will happen next, more precisely, on Saturday, when the British Parliament holds an extraordinary hearing.
The upcoming trading week in terms of the economic calendar is rather scarce; only orders for durable goods in the USA can be distinguished. For this reason, all emphasis will be shifted to the information background, which is likely to have a proper impact on the currency market.
The most interesting events are displayed below --->
Tuesday, October 22
USA 14:00 Universal time. - Sales in the secondary housing market (September): Prev 5.49M ---> 5.45M forecast
Thursday October 24th
ECB meeting
USA 12:30 Universal time. - Orders for durable goods (Sep): Prev 0.2% ---> Forecast -1.0%
USA 12:30 Universal time. - Applications for unemployment benefits, primary and repeated
USA 14:00 Universal time. - New Home Sales (Sep): Prev 713K ---> Forecast 691K
Further development
Analyzing the current trading chart, we see quotation fluctuations around 1.2900, alternately changing sides. The effect of ambiguity, that's what we have, is like an agreement with Europe which was agreed upon once again, but the British Parliament for the fourth time can give everyone a ride, issuing a development scenario, as well as with Theresa May.
By detailing the fluctuations, we see that the Pacific and Asian trading sessions were sluggish and in terms of a slight pullback. With the entry of Europeans into the market, trading volumes and local rising interest reappeared. The point of resistance in the face of the psychological level of 1.3000 has not been taken.
In turn, speculators in some respects rest from a stormy Thursday, as the massive background has already passed, and now, the main event is scheduled for Saturday. Thus, in principle, you can lose on the possible comments of senior officials, but the main fluctuation is likely to happen on Monday.
It is possible to assume a primary fluctuation within 1.2830 / 1.2940, where it is necessary to carefully analyze the news feed for comments by high-ranking officials, you can also take advantage of tweeters: Boris Johnson, Jeremy Corbyn, Nicola Sturgeon, Leo Varadkar. It is worth considering another point that in case of another negative decision of the British Parliament on Saturday, we will see an interesting downward gap on Monday, with a further inertial move.
Based on the above information, we concretize trading recommendations:
- Positions for buying and selling, as written above, are focused on incoming information. From the point of view of technical analysis, it is possible to consider positions at the moment of inertia, with a local presence in them.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that the indicator have taken the upside, and why be surprised when we have such a strong bullish mood with tremendous support for the information background.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 18 was built taking into account the time of publication of the article)
The current time volatility is 81 points, which is a lot for this time section. It is likely to assume that even in the absence of a proper information background, the volatility of the day will be close to the daily average.
Key levels
Resistance Zones: 1.3000; 1.3170 **; 1.3300 **.
Support areas: 1.2770 **; 1.2700 *; 1.2620; 1.2580 *; 1.2500 **; 1.2350 **; 1.2205 (+/- 10p.) *; 1.2150 **; 1,2000 ***; 1.1700; 1.1475 **.
* Periodic level
** Range Level
*** The article is built on the principle of conducting a transaction, with daily adjustment
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