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The euro/dollar currency pair showed low volatility of 38 points over the last trading day, but this was enough to maintain a sluggish recovery process. In the current article, we will try to analyze the reasons for the decrease in volatility and the facts of the pressure of the existing background.
From technical analysis, we see the development of the mirror level of 1.1180 in terms of the downward course, expressed in a sluggish recovery process. The total rebound last time was only 69 points, this is about 23% relative to the entire length of the oblong correction. We have some restraint of sellers since the overbought single currency is felt in the market even at the time of recovery. In turn, the dynamics of the volatility after approaching the mirror level of 1.1180 fell several times, which reflects not only the technical nature but also the emotional component of market participants, that is, overheating of long positions paired with growing ambiguity forced many to leave the transaction, moving to wait area.
Analyzing the past day hourly, we see a smooth recovery, among which only one candle stands out at 21:00 (time on the trading terminal). The causes and consequences of the surge will be analyzed later. In the subsequent period, the end of the US-Asian trading session was in terms of a low-amplitude downward trend.
As discussed in the previous review, speculators as early as Monday (October 22) considered the framework of 1.1145/1.1180 in terms of working on their breakdown and subsequently re-qualifying the movement as restorative as soon as the border of 1.1145 fell. That is, short positions were laid at the time of passing the mark of 1.1145, with the prospect of a decline to 1.1120-1.1080. The first point (1.1120) has already been reached, where partial and full profit-taking was made.
Looking at the trading chart in general terms (daily period), we see the first full-fledged rollback in 8 trading days with the possibility of restoring a relatively oblong correction. The clock component of the main downward trend (1.5 years) is not yet changed, the trend change has not occurred, the oblong correction is still within the tolerance of the local change. The emotional component of the market has gone down, and this confirms the decrease in volatility.
The news background of the past day had in itself data on sales in the secondary housing market in the United States, which are not just declining, they fell by -2.2% with a forecast of -0.7. The reaction of the US dollar to the statistics was almost zero, for the reason that all the attention of market participants was focused exclusively on the proceedings regarding Brexit.
The early process of agreeing on a new project for the withdrawal of the United Kingdom from the European Union failed. The House of Commons of the British Parliament rejected a proposal by Prime Minister Boris Johnson regarding the expedited adoption of the law on ratification of the agreement, to which the Prime Minister responded by recalling the bill from Parliament.
Britain will not be able to meet the deadline until October 31, as a result of which the head of the European Council, Donald Tusk, decided to recommend the leaders of the 27 EU countries to accept the request to postpone Brexit until January 31, 2020.
"Following BorisJohnson's decision to pause the process of ratification of the Withdrawal Agreement, and to avoid a no-deal #Brexit, I will recommend the EU27 accept the UK request for an extension. For this, I will propose a written procedure."Donald Tusk tweeted @eucopresident
In turn, Donald Tusk's statement to the European Parliament regarding the postponement said: "We must be ready for any scenario. But one thing should be clear: as I told Prime Minister Johnson on Saturday, a hard Brexit will never be our solution."
The reaction of the single currency to the expanded hype on Brexit was not so great, just the above-indicated candle (21:00, 22.10.2019) reflects a local splash with an amplitude of 33 points. The reaction to the noise from the pound at times exceeded the dynamics of the euro/dollar and amounted to 122 points.
Today, in terms of the economic calendar, we do not have statistics for Europe and the United States. Thus, market participants will monitor the incoming background information and prepare for tomorrow's meeting of the European Central Bank, where ECB President Mario Draghi will make his last speech.
Further development
Analyzing the current trading chart, we see a very sluggish but still progressive recovery process, where the quote has managed to reach the level of 1.1106 so far. We see such a strong ambiguity in the market that even with a strong overbought seller are not ready to fully return to the market.
Detailing the hourly available day, we see that the average hourly candle has volatility of about 5 points and the direction from the beginning of trading sessions goes down.
In turn, speculators to a greater extent concluded to leave short positions at the stage of touching the first waiting point (1.1120), since there are significant ambiguity and indecision in the actions of market participants. Short positions will be resumed in case of a characteristic information background and price-fixing below 1.1100.
It is likely to assume that in case of loss of the downward mood and the absence of fixation below 1.1100, the upward interest may resume again, returning the quote to the area of 1.1150-1.1180.
The tactic of monitoring the information background for comments and actions regarding Brexit remains, as it will help to determine the emotional mood of the market.
Based on the above information, we derive trading recommendations:
Indicator analysis
Analyzing different sector timeframes (TF), we see that the indicators have a characteristic multidirectional. Short-term periods fluctuate during the recovery phase, variably signaling a sell/buy. The intraday outlook reflects that recovery. The medium-term outlook is still under the pressure of inertia.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 23 was built taking into account the time of publication of the article)
The volatility of the current time is 25 points, which is low for this period. It is likely to assume that in the case of maintaining the characteristic caution and sluggish recovery, volatility will remain at a low level. The acceleration of volatility can occur in the case of a really strong information background or a breakdown of the mirror level of 1.1180.
Key levels
Resistance zones: 1.1180*; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.
Support zones: 1.1100**; 1.1000***; 1.0900/1.0950**; 1.0850**; 1.0500***; 1.0350**; 1.0000***.
* Periodic level
** Range level
*** Psychological level
**** The article is based on the principle of conducting transactions, with daily adjustments.
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