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The pound/dollar currency pair does not give rest to market participants, keeping the market price still so high that the question arises, is it the stage of recovery? – we will analyze this difficult question in our article.
From technical analysis (TA), we see the iron resistance of the quotation concerning a significant overstrain, where the range level of 1.2770 (1.2750/1.2770/1.2800) still plays the role of a solid support. A very controversial point, the level of 1.2770 refers to the strong and proven coordinates, but we have a significant overbought and working off from the stronger level of 1.3000, which refers to the psychological. Thus, the breakdown of the level of 1.2770 could have come much earlier, as well as the recovery process itself, if not for the emotional component of the market. So, it seems that we are close to the point, and it is, in this particular case, working with the GBPUSD pair, a significant role is played by the emotional component, as the pressure in terms of the information background is simply enormous, and many market participants literally turn a blind eye to technical factors. The question of recovery remains open, but theoretically, we are at an intermediate stage, where growth is temporarily limited, and the decline has not yet reached the scale that many expect.
In terms of volatility, we see low indicators, but the last three trading days still have an insignificant, but still an increase: 58 – 65 – 97 points.
Looking at the hourly past day, we see that the entire volume of volatility fell on the period of 12:00-17:00 hours (time on the trading terminal), where an upward jump in the price of 97 points was recorded. Followed by a rollback on the impulse and an evenly horizontal stroke.
As discussed in the previous review, traders have been holding short positions for quite a long time, with the hope of recovery, and even now, with a pullback, positions are still preserved, since the prospect for them is quite large. An alternative plot was considered in terms of fixing the price higher than 1.2865, with local long positions. The main deals of conservative traders were considered after fixing the price below the range level of 1.2770 (1.2750/1.2770/1.2800).
Looking at the trading chart in general terms (the day), we see a still holding inertial upward move, with a slight adjustment in terms of stagnation. So, as we wrote at the beginning of the article, there is characteristic indecision, and in this case, it can be designated within 1.2770/1.3000. That is, in the case of maintaining the same emotional pressure, we can see a protracted side process. In terms of the trend, everything is unchanged: the current year (2019) is expressed as a V-shaped movement; 1.5 years is expressed in a downward trend.
The news background of the last day contained data on housing prices from S&P/Case-Shiller USA, where their level remained unchanged, 2.0%. There were also statistics on pending home sales in the United States, where growth was recorded from 2.5% to 3.9%. There was no market reaction to the statistics.
What influenced the dynamics of the pound in the past day? – Emotion; Brexit; Domestic political showdown.
So, Prime Minister Boris Johnson still managed to achieve early parliamentary elections, which will be held in the UK on December 12. Since he succeeded, the recipe is simple, abandon initiatives and move to a bill that needs a simple majority to pass. Voila – 438 members of parliament voted for the elections, 20 – against, 181 – abstained.
Of course, it is not so simple, the opposition also made its contribution, which still changed its opinion on Johnson's initiative regarding the early elections.
"Exit without an agreement is no longer being considered, so Labor will support the general election tonight," Labor leader Jerome Corbyn said on Twitter @jeremycorbyn
In turn, the head of the European Council, Donald Tusk, said that the postponement of Brexit has officially happened, and now Britain has to leave by the deadline of January 31, 2020. Tusk also noted that the allotted time should be used wisely, and he strongly hopes for a successful outcome.
Today, in terms of the economic calendar, we had a significant package of statistics on the United States. The ADP report on the level of employment in the private sector was published, where the growth of 120 thousand was expected against 135 thousand, but in the end, the data were better than expectations. Employment growth amounted to 125 thousand according to the ADP report, and the previous indicators changed 135 thousand – 93 thousand. After that, the data of the first estimate of US GDP (Q3) came out almost synchronously, with forecasts of a further slowdown in economic growth, which to some extent coincided, but not quite. So, the data came out better than expected and amounted to 1.9% against the expectation of 1.6%
The key event of the day, where all the attention of market participants is concentrated without exception, is the results of the meeting of the Federal Committee for Open Market Operations. Many people are ready to reduce the refinancing rate morally, and there is a possibility that this step has already been taken into account in the price. The most remarkable point is that we have a third consecutive rate cut, and it is extremely fast, which is certainly frightening. At the moment, what market participants are waiting for is a subsequent press conference, where Jerome Powell can enlighten about the plans of the regulator. So, there are rumors that the Fed is preparing to take a break after the third rate cut, where it is possible to suspend the monetary policy easing campaign this year.
Further development
Analyzing the current trading chart, we see the reaction of the dollar to the released package of statistical data on the States, where everything is not so bad as previously expected. It is worth considering that the quote has grown in advance to the level of the maximum of the last day – 1.2904, and in fact, the recovery against the background will not fundamentally change the picture. Thus, an "artificial" oscillation within the horizontal stroke with variable boundaries of 1.2800 (-50p) and 1.2880 (+40p) is still possible. Open the chart H4, this oscillation is visible.
By detailing the per minute movement, we see that during the Pacific-Asian trading session, a remarkable stagnation of 1.2855 / 1.2870 was formed, against which a surge began, but already at the start of the European session (8:30-10:00, time on the trading terminal). There were no more surges, everyone is waiting for the outcome of the Fed meeting.
In terms of the emotional state of the market, the ambiguity with low volatility reflects the behavior of the quote.
In turn, traders continue to hold short positions, but it is worth considering that these traders do not just have local positions, they are strategic, and have a large stock stop, with conservative capital management. The approach of the main mass is expected after fixing lower than the range level of 1.2770 (1.2750/1.2770/1.2800). Alternative positions are also being considered, possibly on a spike in terms of breaking through the previously announced corridor.
It is possible to assume a primary slowdown in the range of 1.2854/1.2900, before the Fed's speech, where local outbursts are possible, depending on the rhetoric of the regulator regarding further actions, and I do not exclude that they will lead to a decrease in the quotation.
At the same time, we are closely watching the news feed, as there may be emissions and rumors about the actions of the Fed.
Based on the above information, we derive trading recommendations:
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that indicators of indicators at all main time intervals signal an upward interest, which cannot be considered 100% reality. So, the previously marked boundaries of the fluctuations take over the entire flow of short-term and intraday periods, but the medium-term period is steadily following the previously set inertial course. Thus, indicator analysis should be run through your immediate prospects so that there is no unjustified expectation.
Volatility per week / Measurement of volatility: Month; Quarter; Year.
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 30 was built taking into account the time of publication of the article)
The volatility of the current time is 47 points, which is a low indicator for this time section. It is likely to assume that there is still a chance of accelerating volatility, but it is closer to the results of the Fed meeting.
Key levels
Resistance zones: 1.3000; 1.3170**; 1.3300**.
Support zones: 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
*** The article is based on the principle of conducting transactions, with daily adjustments.
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