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From the point of view of a comprehensive technical analysis, we see that sellers do not stand still and literally in a few days there was a complete development of the past rally, and this is more than 400 points of the course. In general terms, the end of the year was a success when you see this kind of jump up / down, where the working method did not carry complex and multifaceted action algorithms. So it turns out that the last rally up was exclusively on emotions since we recovered so quickly. There is no definite answer here and probably there was a combination of circumstances where at first there was a long and painful lateral movement, and then an exhaust with the symptom of FOMO [loss of profit syndrome]. In turn, on December 13 at the low liquidity of the market [00:00 hours],
In terms of volatility, we see that since the beginning of December, the average daily indicator is 124 points and this is 42.5% more than a month earlier. That means that the expected acceleration has occurred, and the fact of retention confirms the preservation of high activity in the environment of speculators.
Analyzing hourly the past days, we see a particular descending inertial move, the pace of which was set from 00:00 and lasted almost until the end of the trading day. In total, we received 234 points, where the quotes easily crossed the interaction range of 1.3200 / 1.3180 and fixed below it. In fact, the quotes started a control rapprochement with the psychological level of 1.3000, which is of particular interest to many market participants.
As discussed in the previous review, even from the beginning of the recovery phase, traders with short positions moved to a regrouping of trading forces fixing deals in the region of 1.3200 / 1.3180. The reopening of transactions was planned after fixing the price below the value of 1.3100.
Considering the trading chart in general terms [the daily period], we see that from September 3, as soon as the quotes touched historical lows, the same rebound arose that first evolved into an oblong correction, and then into the supposed fracture of the medium -term one and a half year trend. Numerical indicator: stroke size - 1556 points; duration - 76 trading days.
The news background of the past day had statistics for the UK, where the figures were not as bad as many expected. So, the unemployment rate remained 3.8%, although they expected growth to 3.9%. In turn, the change in the number of applications for unemployment benefits increased from 26.4K to 28.8K, and the change in employment, 3m / 3m, on the contrary, shows an increase of 24K. In the afternoon there was a published data on the United States where the number of building permits issued increased from 1,461M to 1,482M, and the volume of construction of new houses increased from 1,323M to 1,365M, taking into account the revision of previous data. The ceasing for the buck's strengthening came from the data on industrial production in the United States, where instead of falling to -1.6%, there was a decrease to -0.8%
Market reaction to statistics was in favor of the US dollar amid a general recovery.
In terms of informational background, the main buzz was caused by an unexpected statement by Prime Minister Boris Johnson, who proposed submitting to parliament a bill prohibiting the extension of the transitional period. That is if before the end of 2020 if there is still no agreement on trade issues between Britain and the European Union, then there will be no additional time and this will not benefit businesses. Against this background, the pound sterling rushed into the negative zone, showing the very highest volatility.
In turn, Michel Barnier, the EU's chief Brexit negotiator, said the EU would do its best to conclude a trade agreement before the end of next year so that there would be no legal problems. But even with such an answer, the EU is preoccupied with this decision in connection with the risk since it initially implied the possible extension of the transition period to two years.
The Labor Party also held a meeting yesterday in connection with its catastrophic election defeat where its former leader Tony Blair criticized Jeremy Corbyn. So, party members harshly criticized Corbyn for leading the party to the worst result since 1935. Thus, the rumor that Jeremy Corbyn will soon leave his post is already a fact than speculation.
Today, in terms of the economic calendar, we are waiting for data on inflation in the UK, where, according to preliminary estimates, they expect a decrease from 1.5% to 1.4%, which may put pressure on the pound.
Further development
Analyzing the current trading chart, we see that the quotes fluctuate within the value of 1.3100, that means it is still conditionally concentrating on the area of 1.3100 / 1.3180. In fact, fixing short positions led to a decrease in trading volumes and a small regrouping of trading forces, this reflects the interval of 19:00 N / A. Whether this will benefit future short positions, there is a chance, but do not forget that under the quotes the control psychological level of 1.3000 continues to be located. In terms of volatility and the emotional component of the market, there are no prerequisites for a decrease, speculative interest has a high coefficient.
By detailing the per-minute time span, we see that the market has drawn a slight stagnation / retracement of 50 points, where the concentration of trading forces is in the region of 1.3100, which is similar to the torture of the range.
In turn, traders / speculators are trying to re-enter short positions, referring to the extension of the move towards the psychological level of 1.3000. These operations are in some ways risky in connection with rather strong support, but if we consider everything that happens in terms of return, then there is a sacred meaning here.
Having a general picture of actions, it can be assumed that if the quotes still manage to strengthen from the area of 1.3200 / 1.3180, then the move towards 1.3030-1.3000 can occur rather quickly. What will happen next, although it's hard to say, is a temporary flat or a further return to 1.2770 will depend on the price behavior within the level of 1.3000.
Based on the above information, we derive trading recommendations:
- We consider the buy positions in two versions: the first, the area of 1.3100 / 1.3180 does not release the quotes and we continue to fluctuate within its boundaries, where the local entrance is within 1.3140; the second option is already considered in the case of mining the level of 1.3000.
- Traders are already making sell positions with part-time trading, considering the prospect of a decrease to 1.3030-1.13000
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that the indicators have gradually returned to the downside, but the pressure of the past upward rally is still reflected in some areas of the TF. It is important to take into account that, due to a hang within 1.3100, short-term temporary sections can be variable in signals.
Volatility per week / Measurement of volatility: Month; Quarter Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(December 18 was built taking into account the time of publication of the article)
The volatility of the current time is 62 points, which is already good for the start of trading. It is likely to assume that if freezing in the area of 1.3200 / 1.3180 does not occur, then acceleration of volatility may still occur.
Key levels
Resistance zones: 1.3180 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Areas: 1,3000; 1.2885 *; 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
*** Psychological level
**** The article is built on the principle of conducting a transaction, with daily adjustment
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