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From the point of view of a comprehensive analysis, you can see the first signs of recovery/stabilization, and now let's talk about the details.
The local highs were updated once again last trading week, and the area of interaction of trade forces 1.1440 / 1.1500 became even closer to market participants. Thus, the rapid inertial move gained more than 550 points in less than three weeks, while the correction move was absent and the pullback did not have a significant part in the market. The boiling point in such a significant growth process was a gradual deceleration, where speculators could no longer notice the area of interaction of trade forces, and overbought could no longer be hidden behind emotions, and the first outlines of recovery arose. This is about Thursday and Friday last week, where market participants still managed to partially change the structure of upward inertia, returning the quote to the area of 1.1250. The upward inertial course lasted 12 trading days, where the change is only a small part of the possible correction. Everything would be fine if it were not for a high desire to keep the set mood, and this is not just a speculative hype, but a number of changes in the market tact.
So, the quote managed to break through the flat formation recently, execute the process of compression of ticks, as well as overcome a number of important price levels, which certainly gave confidence to the followers of the upward development. There was only one left, but the most important area of interaction between the trade forces 1.1440/1.1500, which everyone is afraid of without exception, since history has already shown that even speculative excitement is not all in strength. Therefore, one of the main tasks of the followers of the upward movement is to regroup the trading forces, where the formation of a correction or slowdown in a wide amplitude was implied. This process will make it possible to change the set mood from inertia to incoming, which will maintain the upward trend and give hope for a change in the medium-term trend from the beginning of 2018. Naturally, these are just theories, but in this case with a large baggage of confirmed facts. Now, you should not fight thoroughly and rush into a buy position, as the signal for action will only be price consolidation above the level of 1.1500 in the daily period. At the same time, you should clearly understand that the market is still on the verge of strong emotions, which means that local operations are still relevant and we should not exclude from the development prospects a plot that has already been in the near history, and I mean the reverse course from the area of interaction of trading forces.
In terms of volatility, an acceleration of 48% relative to the daily average is recorded, which indicates the prevailing speculative mood of market participants. If we take into account the recovery process from Thursday, the fact of speculation is coming to the fore.
Considering the trading chart in general terms, the daily period, it is worth highlighting the high activity from the beginning of the year, where the dynamics are still at a high level, which is a very rare occurrence in terms of duration.
Friday's news background contained data on the volume of industrial production in the European Union in April, where it recorded a decline of 17.1%, which was the largest drop in the history of EU statistics.
According to Eurostat, the dynamics of industrial production were strongly influenced by quarantine measures to contain the COVID-19 pandemic. The largest decline in March and April was recorded in the production of vehicles (-33.5% in March and -68.5% in April compared with the previous months). At the same time, the output of pharmaceutical products in March increased by 16.9% in March, and declined by 11.9% in April.
In terms of general information background, we have a statement by the head of the Federal Reserve Bank [FRB] Dallas, Robert Kaplan, who believes that the unemployment rate in the United States could be 8% by the end of the year.
"We are now on the way down," said the head of one of the 12 regional banks that are part of the US Federal Reserve System (Fed), which acts as the central bank. We will get a positive increase in the number of jobs in June and July. But even with this growth, we will end the year with high unemployment. "
It is worth recalling that the unemployment rate jumped from a minimum for 50 years of 3.5% in February to 14.7% in April, which corresponds to the situation after the Second World War, and then it declined to 13.3% in May which is unexpected for most experts.
Today, in terms of the economic calendar, we do not focus on statistical data for Europe and the United States, which means that the close attention of traders will affect the technical part, as well as the information background.
Further development
Analyzing the current trading chart, you can see a slight pullback after a rapid downward move, where the quote is still within the range of the deceleration amplitude of the past week 1.1240/1.1400. Preserving fluctuations in the rear range is one of the possible development plots, in addition to the correction course. In fact, it is about stabilizing the trading interest in order to prepare market participants for the progressive price movement.
It is worth considering that the coefficient of speculative positions is still at a high level, which means that the market is prone to emotions.
Two options can be assumed: the first one is considering price fluctuations in the variable range of 1.1240/1.1400, which will mean both the stabilization process and the prospect of further development in terms of the breakdown of the trade forces interaction area of 1.1440/1.1500; The second option considers a further corrective move in case of price consolidation below the level of 1.1210, with the prospect of a movement to 1.1180-1.1150 --- 1.1080.
Based on the above information, we derive trading recommendations:
- Sales positions are considered below the level of 1.1210, in the direction of 1.1180. The second entry is lower than 1.1170, with a movement to 1.1150 - 1.1080.
- Purchase positions are considered above the level of 1.1300, towards 1.1400.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments on hourly periods have changed their indicator from buy to sell, due to the downward trend of past days. In turn, daily periods are still focused on upward inertia, giving a buy signal.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation calculated for Month / Quarter / Year.
(June 15 was built taking into account the time of publication of the article)
The volatility of the current time is 41 points, which is still a high value for this time section. It can be assumed that the dynamics will accelerate at the start of the European session.
Key levels
Resistance Zones: 1.1300; 1.1440 / 1.1500; 1.1650 *; 1.1720 **; 1.1850 **; 1.2100
Support Zones: 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
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