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From a comprehensive analysis, we see the return of the quote to the main support point of 1.2770, while showing increased activity. Now about the details. The development of the past correction course reached its limit, the quote returned to the lower limit of the range (1.2770//1.2885//1.3000), where the chances of breaking the control level (1.2770) have increased significantly. The price fluctuation since the beginning of March was remarkable, where at first we recorded an insatiable upward move that scared the followers of the downward development, and then similar impulses returned the quote to the base point. The scale of the V-shaped (474 points) and there is no limit to the joy of speculators.
Naturally, the show was due to the external background, which first weakened the dollar, and then put pressure on the pound, which, in principle, did not need to be pressed, but still there were pressure factors.
Regarding the theory of downward development, everything is going exactly as we predicted last month. External factors are weighing on the pound, although their pressure is not complete. Fixing the price on a range (1.2770//1.2885//1.3000) confirms the fact that the clock component changes, and the range levels gradually lose their strength, which makes it possible for the price to pass them without extra effort. We still have the last stage in this oscillation and this is the passage of the level of 1.2770, which will be a transition to a new level, or rather, the start of the recovery process relative to the medium-term upward course.
In terms of volatility, we see an indicator of 172 points, which is 63% higher than the average daily value. In fact, we have been recording acceleration for more than three weeks, which affects the dynamics and the influx of speculators into the market. Since the beginning of February, the daily average has increased by 12%.
Volatility details: Friday-193 points; Monday-110 points; Tuesday-102 points; Wednesday-102 points; Thursday-107 points; Friday-103 points; Monday-165 points; Tuesday-245 points; Wednesday-172 points. The average daily indicator relative to the volatility dynamics is 105 points (see the volatility table at the end of the article).
Detailing the past day by the minute, we see a sharp two-minute jump in the price in the morning section of time (9:00-9:01), the value of which was 100 points. After that, there was a recovery relative to the momentum, but from 16:30 the initial downward movement resumed, having a minimum value of 1.2803.
As discussed in the previous review, speculators work on the outside, jumping on the market jumps, which brings them affordable profits. At the same time, intraday traders considered a downward move from the value of 1.2900, towards 1.2870-1.2800, which also brought profits.
Looking at the trading chart in general terms (daily period), we see that there is a chance of moving to a new level, where the recovery relative to the medium-term trend will pass the 50 mark%
The news background of the past day included the final data on British GDP for the fourth quarter, where the rate of economic growth slowed from 1.2% to 0.6% with a forecast of 0.9%. At the same time, data on industrial production were published, where the decline will accelerate from -1.8% to -2.9%, with a forecast slowdown of -2.7%.
The statistics are truly terrible, but everything paled against the background of an emergency meeting of the Bank of England, during which the refinancing rate was lowered by 50 basis points, to 0.25%. This step was taken in connection with the deteriorating situation with coronavirus, where the regulator is ready to maintain the confidence of businesses and consumers in difficult times, increase the cash flows of businesses and households, as well as reduce the cost and improve the availability of finance.
In fact, we received a kind of baton, where the Fed set a trend, and others supported it.
During the subsequent press conference, the regulator outlined the reasons for such drastic actions, referring to the support of the economy in connection with the escalating risk of coronavirus. Mark Carney also mentioned that their actions are coordinated with the actions of the Ministry of Finance, ensuring the maximum effectiveness of our initiatives.
Later, the Finance Minister, Chancellor Rishi Sunak, spoke, saying that the United Kingdom intends to invest about 600 billion pounds for prosperity after Brexit, which is 3 times more than in the last forty years.
"Over the next five years, we will invest more than 600 billion pounds in our future prosperity. Net public investment in real terms will be the highest since 1955," the Chancellor said
Today, in terms of the economic calendar, we have data on applications for unemployment benefits in the United States, where a slight decrease of 4,000 is expected (Primary +2 thousand; Repeated -6 thousand).
The main event is the meeting of the European Central Bank, where all attention is focused on the interest rate, whether it will be reduced or the regulator will be able to get out of a kind of relay.
Further development
Analyzing the current trading chart, we can see how the quote is under pressure from the external background, where there is already a fluctuation around the level of 1.2770. In fact, such a strong pressure can play into the hands of the theory of downward development, since the level of 1.2770 is not the first time stormed by the quote, and when there is such an impressive lever in the form of a V-shaped model behind, the level can crunch without extra effort. Let me remind you that fixing the price lower than 1.2725 with holding the set move will lead to a new level – recovery.
From the point of view of emotional mood, we see an abundance of speculators who bring activity to the market and as a fact local jumps. If the mark of 1.2725 is broken, conservative traders who are already in short positions may be added.
Detailing the minute-by-minute section of time, we see stagnation during the Pacific and Asian trading sessions. A new round of downward movement occurred at the start of the Europeans, where, as it was, a touch of the level of 1.2770 was recorded.
In turn, speculators are working on jumps, where they are waiting for a possible reaction to the ECB's actions, which theoretically can affect the dynamics of the pound/dollar pair, based on the correlation. At the same time, the mainstream of traders analyzes the level of 1.2725, since if it breaks and the set mood is maintained, we will see a new round of short positions.
Having a general picture of the actions, we see that the chance of a breakout of the range of 1.2770//1.2885//1.3000, there are places where a strategy based on the theory of downward development is more relevant than ever. In turn, we should not rule out another rebound, especially in such a volatile market, where speculators can intercept initiatives just against the backdrop of the ECB meeting.
Based on the above information, we will output trading recommendations:
- Buy positions are considered higher than 1.2800, towards 1.2845-1.2885.
- Sell positions are considered if the price is clearly fixed below 1.2725, with confirmation in the form of maintaining the inertia course. The prospect has a large scale, but the first point of interaction of trade forces is around 1.2620.
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that due to a massive downward move and the return of the price to the area of 1.2770, the indicators of technical instruments have unanimously taken a downward position.
The volatility for the week / Measurement of volatility: Month; Quarter; Year.
The volatility measurement reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(March 12 was based on the time of publication of the article)
The volatility of the current time is 114 points, which is already 8% higher than the daily average. It is likely to assume that activity and volatility growth will continue, and this will be supported by the external background.
Key levels
Resistance zones: 1.2770**; 1.2885*; 1.3000; 1.3170**; 1.3300**; 1.3600; 1.3850; 1.4000***; 1.4350**.
Support zones: 1.2725*; 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 based on the principle of conducting a transaction, with daily adjustments.
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