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From the point of view of a comprehensive analysis, you can see the reverse price movement, where the point of interaction of trading forces coincided with the support level of the past week and now let's talk about the details.
The past trading day was held at a high speed in terms of short positions, where market participants, after a slight slowdown within 1.1320/1.1355, managed to break through the cyclical amplitude and consolidate lower than 1.1300, where it was no longer possible to stop sellers. As a result, we returned to the area by changing the support of the past week 1.1250 (+/- 20 points), where the quote stopped abruptly and, as a fact, formed a pullback with the transition to consolidation 1.1253/1.1275.
The existing oscillation and pivot points confirm the fact that the inertial stroke slows down on May 25 once again, where the stop process starts on June 5, which goes into the framework of the wide fluctuation 1.1250 (+/- 20 pip) / 1.1400 (1.1440).
Regarding the theory of development, there is a tendency to change the market tact of the medium-term trend from 2018, if the quote manages to consolidate higher than 1.1500 in the daily period. Having a fluctuation in the variable range of 1.1250 (+/- 20 pip)/1.1400 (1.1440) plays the role of stabilizing trading forces, which, based on a hypothesis, will bring a consistent movement to the market.
Regarding new assumptions and observations, one can distinguish the outlines of the graphic figure "head and shoulders" that arose as part of the oscillation of 1.1250 (+/- 20 pip) / 1.1400 (1.1440), [H4 time period]. If this pattern is executed, it will fundamentally violate the theory of changes in market tact, but at the same time, retain the regularity of the past regarding the main trend, as well as the price reversal of March 9.
Analyzing the past trading day by minute, it is worth highlighting that the downward mood was set at the beginning of the European session, but the main round of short positions declined at 13:00 and lasted until 14:30 [UTC+00 time on the trading terminal].
As discussed in the previous review, traders focused on price slowdown within 1.1320/1.1355, working on the breakdown of established boundaries.
Our trading recommendation from Tuesday regarding local activity and work on the breakdown of the established boundaries coincided, with a profit on the trade deposit.
In terms of volatility, we continue to record acceleration, by 40% relative to the daily average. It is worth considering that such a confident dynamic and high speculative activity has been taking place on the market for more than one week. It can be assumed that due to the preserving emotional and informational background, the market will continue to amaze traders with high volatility.
Considering the trading chart in general terms, the daily period, it can be noted that the area of interaction of the trading forces of 1.1440/1.1500 has a high level of confirmation on history, which is enough to switch to the period 2015-2016.
The news background of the past day undoubtedly surprised investors, and so, the statistics for the United States were fundamentally different from forecasts. Retail sales came out with different indicators, where the previous data was reviewed for the better from -21.6% to -19.9%, and the current year-on-year published were much better than the forecast of -6.1% (forecast -21.6% On a monthly basis, retail sales for May show an increase of 17.7%, while industrial production also came out better than expected, showing a slowdown to -15.3%, instead of -18.0%.
Against such a positive news background, the US dollar almost immediately went into strengthening.
In turn, the head of the Federal Reserve [Fed] Jerome Powell spoke in Congress yesterday, saying the US economy is facing long-term problems due to rising unemployment and a wave of bankruptcy of small businesses in the wake of the coronavirus pandemic, despite recent signs of recovery.
"Until society is confident that the disease has been brought under control, a full recovery is unlikely. The level of production and employment remains much lower than before the pandemic, and there is a high degree of uncertainty regarding the timing and strength of the US economic recovery" Powell stated as he spoke in the Senate Banking Committee with a semi-annual report on monetary policy.
The head of the Fed also noted that the longer the crisis lasts, the higher the probability of prolonged damage due to the permanent loss of jobs and the closure of the business.
Today, in terms of the economic calendar, macroeconomic data for the European Union awaits us, where the inflation rate may decline from 0.3% to 0.1%, which may put pressure on the European currency. It is worth considering that a preliminary estimate of inflation already indicated a slowdown, which means that investors are ready for this reversal and this indicator is already included in the quote. At the same time, we have data on construction in Europe, which can be significantly reduced, and this will give strength to the reduction of the euro in the implementation of fundamental analysis.
Data on construction will be published in the United States in the afternoon, where they expect a slight improvement. So, the construction of new houses may rise by 17.8%, and the building permit may even rise by 12.4%. US data indicate a rise in the dollar in terms of fundamental analysis.
Further development
Analyzing the current trading chart, we can see that after local overselling, buyers try to regain their positions, breaking the upper limit of consolidation accumulation of 1.1253/1.1275 and heading towards the level of 1.1300. It is worth considering that in terms of technical analysis, we have another development of the lower boundary of the variable range of 1.1250 (+/- 20 pip) / 1.1400 (1.1440), which means that there is a chance of a reversal on the market.
In terms of the emotional component of the market, it is worth noting that speculative activity still has a high coefficient, which means that the market will have high volatility.
It can be assumed that market participants are targeting the area of 1.1300/1.1320, which will reflect a partial recovery relative to the previous decline. Further fluctuation will depend on the behavior of prices within a given area, since a rebound should not be ruled out.
Based on the above information, we derive trading recommendations:
- Consider buy deals in the direction of 1.1300/1.1320. We consider further positions if prices are consolidated higher than 1.1325 in the direction of 1.1355–1.1400.
- Consider sell deals in case of a price rebound from the 1.1300/1.1320 area, returning the quote to the levels of 1.1250 - 1.1230.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments on the hourly periods took a neutral position due to the existing recovery process. The daily periods still indicate a buy signal due to a multi-week upward trend.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation calculated for Month / Quarter / Year.
(June 17 was built taking into account the time of publication of the article)
The current time volatility is 36 points, which is still considered a low indicator for this time section. It can be assumed that volatility will continue to rise due to the high speculative mood of the market.
Key levels
Resistance zones: 1.1440 / 1.1500; 1.1650 *; 1.1720 **; 1.1850 **; 1.2100
Support zones: 1,1300; 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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