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An intensive upward move brought the quote to a psychological level, what to expect next, a rebound or a breakdown? We will answer this difficult question in our article.
From the point of view of technical analysis, we see an intensive upward move, where the stagnation during the last week clearly played into the hands of this movement, as in the end, we have made a move up to the maximum on October 31, and this, incidentally, is the last point, which is the conditional coordinates of the psychological level of 1.3000.
What to expect from this development?
The primary judgment draws information from the well-established flat formation of 1.2770/1.3000, which like a magnet attracts attention for as long as a month. In this case, we see a characteristic market ambiguity, where a kind of indecision of market participants is directly reflected by low volatility during 17 trading days, (the dynamics of daily candles from high to low: 58 – 65 – 97 – 62 – 75 – 45 – 67 – 58 – 53 – 83 – 53 – 118 – 58 – 40 – 63 – 51 – 81 points). Thus, what is the probability that right now the quote with low activity will be able to break through such a strong level of 1.3000, increasing the movement against the global trend – the answer is correct, the probability is low, there is only one "but".
This is where the second judgment arises, unjustified emotions that arose against the background of the information flow, which we will analyze in more detail later. So, the small average daily amplitude with the support of the information background locally breaks the level of 1.3000, fixing above it, where it encounters a fine line of the FOMO market (lost profits syndrome). This is where it becomes really dangerous, as many market participants will have the desire to jump onto a moving train in anticipation of a possible inertial move. Only if we change our minds a bit, we will see that the pound already has a strong overbought and its further strengthening is not supported by the foundation in terms of global consideration (fundamental + technical analysis).
Analyzing the hourly past day, we see in some way a steady upward trend, where local spikes came for the period of 09:00-12:00 (time on the trading terminal). After that, the control value was touched in the face of the maximum on October 31 (1.2974), and as a fact, the slowdown in the framework of 1.2940/1.2970.
As discussed in the previous review, many traders moved to complete fixation of previously opened long positions as soon as the quote touched the maximum on October 31, giving a signal to speculators about a possible slowdown and repetition of the plot of the previous period.
Looking at the trading chart in general terms (daily period), we see that the quote is close to the upper boundary of the flat formation of 1.2770/1.3000. Some traders began to discuss that the existing oscillation is very similar to the graphic figure "triple top", which foreshadows the subsequent downward move.
The news background of the last day did not contain statistical data on the UK and the United States, thus the main emphasis was solely on the information background, which almost daily touches on the topic of early elections and the UK&EU process.
The closer to the election, the more noise, and expectations.
That's what you can call everything that happens in the United Kingdom. The two largest parties took a campaigning position, trying to get voters interested as much as possible, but the main problem (Brexit) gradually began to disappear from all this noise, which is why the early elections will take place.
So, during yesterday's confederation of the British industry in London, business reminded Boris Johnson and Jeremy Corbyn of the key problem of Brexit, whereas a result the leaders of the election race did not receive the response of the participants.
"These guys would have to lower their heads in shame over the last three years of stupidity that continued. If this happened in business, most of them would have long gone," conference participant Phil Smith said, chairman of the board of directors of IQE Plc, a manufacturer of semiconductor products.
Smith's statement inspired corporate executives, and they pointed out to Johnson and Corbyn the holes in the Brexit plan that pose a greater threat to the UK in terms of breaking with its biggest trading partner the European Union.
In turn, Prime Minister Boris Johnson during the conference announced a temporary delay of the ban on reducing corporation tax in April 2020, where it was planned to reduce the rate from 19% to 17%. The money saved will be spent on voters' priorities, including the state financing of the National Health Service.
So what is the reason for the growth of the pound?
According to many experts, the growth of the British currency is associated with pseudo-optimism about the early conclusion of a Brexit deal. The legs grow in this case from a possible conservative victory in this election race. Let me remind you that a day earlier, the candidates from the Conservative Party participating in this election supported the Johnson deal and are ready to vote for it if they are elected.
As we have understood from all the above, emotions, hopes, dreams work wonders, but we try to think more broadly to see all the angles of this multifaceted situation.
Today, in terms of the economic calendar, we have data on the construction sector of the United States, where the volume of construction of new homes for October should increase from 1.256M to 1.320 M, and the number of building permits issued will decrease from 1.391M to 1.385M.
Further development
Analyzing the current trading chart, we see the movement all in the same framework of 1.2940/1.2970, which was set yesterday. We are faced with a range of expressed fear, where buy positions move to the fixation point, and there is still not enough strength to join the sale. The level of resistance in the face of the upper frame of the field formation restrains the pressure of buyers, and in this case, a massive flow of information is required to traitor it. Otherwise, a repetition of the scenario of the past is inevitable. In terms of volatility, we all continue to concentrate on low indicators, which will continue even if the upper boundary is worked out in the downward direction.
By detailing the per-minute movement, we are in the flat, that is, the existing fluctuation in the form of a flat of 1.2940/1.2970 has formed within the upper boundary of the main flat of 1.2770/1.3000. As you know, there were no impulses or price jumps.
In turn, many traders have left previously open long positions and are now working on the existing accumulation, considering the repetition of the plot in the form of a rebound.
Having a general picture of actions, it is possible to assume that the main steps in the market will occur already in the run-up to and after the elections (December 12), and now the looped oscillation (1.2770/1.3000) with the nature of ambiguity will be preserved, where the rebound from the upper boundary of the flat is a real scenario. Because of exceptions and alternatives, we continue to monitor the border of 1.2770/1.3000, which will be strategic positions and work within the framework of variable positions.
Based on the above information, we derive trading recommendations:
Indicator analysis
Analyzing different sector timeframes (TF), we see that the indicators are still held on the upward interest due to the recent move. It is necessary to carefully analyze the current situation, as in the case of a fracture of the accumulation, a clear signal will be delivered with the transition of hourly intervals to sell.
Volatility per week / Measurement of volatility: Month; Quarter; Year.
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(November 19 was built taking into account the time of publication of the article)
The volatility of the current time is 24 points, which is a low value for this period. It is likely to assume that in the event of a breakdown of the existing accumulation of 1.2940/1.2970, the volatility will accelerate, but within the daily average.
Key levels
Resistance zones: 1.3000; 1.3170**; 1.3300**.
Support zones: 1.2885*; 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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