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From the point of view of complex analysis, we see an intense downward spiral in the structure where speculative positions arose. Movement from the conditional ceiling of 1.2620 led the quote to a mirror level of 1.2350, where it could not resist the wave of short positions, with a local low in the value of 1.2310.
Such a move is a good signal in terms of technical analysis, which suggests that the mirror level of 1.2350 is no longer considered an obstacle for sellers, and the downward movement has a chance to work out the tact of April 21 to April 30 by 100 % Recall that the initial support was in the region of 1.2250, after which an upward spiral arose. Now, the output is 85%, which means that downward development still has a chance.
From the four-hour period, traders noticed that there were no significant changes in the market, and the structure of fluctuations took the form of a variable corridor 1.2150 // 1.2350 // 1.2620. Based on this analysis, the theory of downward development may fall into a closed chain of oscillations, which will significantly complicate the course of short positions.
The global downward trend, which remained unchanged, should also be paid attention to. If we analyze the technical part, we can see that the upward turn on March 20 only had seven days of inertia, after which the movement turned downwards and coursed sideways in the direction of where we're now moving today.
It seems that buyers encountered a deterrent factor, otherwise historical lows that were hit just recently would continue to put pressure on sellers. It forced them to actively shift to long positions.
As discussed in the previous review, traders continued to work on the decline, and the trading recommendation from Wednesday brought us another income.
[We sold positions lower than 1.2400, towards 1.2350.]
In terms of volatility, an acceleration was recorded relative to past days, which was quite expected. Yesterday, it was observed that the dynamics of Tuesday had the lowest rate in three weeks, which is a good signal of an upcoming acceleration.
Regarding the daily monitoring of volatility, we see a gradual normalization of market activity, which happened not only with the GBP / USD pair, but also with the EUR / USD pair and other trading instruments, which is considered a good signal for the emotional mood of market participants.
Volatility detail
MARCH: Monday - 165 points; Tuesday - 245 points; Wednesday - 172 points; Thursday - 358 points; Friday - 359 points; Monday - 144 points; Tuesday - 271 points; Wednesday - 676 points; Thursday - 354 points; Friday - 522 points; Monday - 267 points; Tuesday - 296 points; Wednesday - 333 points; Thursday - 452 points; Friday - 352 points; Monday - 148 points; Tuesday - 227 points.
APRIL: Wednesday - 108 points; Thursday - 126 points; Friday - 198 points; Monday - 116 points; Tuesday - 217 points; Wednesday - 131 points; Thursday - 122 points; Friday - 42 points; Monday - 87 points; Tuesday - 146 points; Wednesday - 193 points; Thursday - 119 points; Friday - 114 points; Monday - 86 points; Tuesday - 198 points; Wednesday - 111 points; Thursday - 106 points; Friday - 78 points; Monday - 94 points; Tuesday - 113 points; Wednesday - 96 points; Thursday - 213 points.
MAY: Friday - 117 points; Monday - 82 points; Tuesday - 69 points; Wednesday - 116 points.
The average daily indicator, relative to the dynamics of volatility is 131 points [see table of volatility at the end of the article].
Yesterday's news contained data on business activity in the UK construction sector, where a decrease from 39.3 to 8.2 was recorded in the index for April.
In the afternoon, ADP published its US employment report for April, which revealed that employment decreased by 20,236,000, slightly better than the forecasted 20,050,000. Traders ignored this indicator.
Meanwhile, UK Prime Minister Boris Johnson is reported to be considering the lifting of quarantine measures as early as May 11.
"We will disclose all the details of the government plan on Sunday. We have chosen this date because we want to be sure that scientific evidence confirms the possibility of lifting the restrictions, however, new information will still be available within the next few days. We want to start implementing some of the plans measures on Monday, if we have such an opportunity," Johnson said.
Considering Britain's massive number of deaths, we should not expect something sharp to come out on Sunday. We will most likely just see a slight mitigation of restrictive measures.
The meeting of the Bank of England has already taken place today, during which it was decided to maintain the base rate at 0.1%, and at the same time, confirmed that quantitative easing now amounts to £ 645 billion, higher than the forecasted £ 625 billion. Such news became a catalyst for the local growth of the English currency.
"The majority of the Committee (seven to two) voted to ensure that the Bank of England continues the repurchase program of UK government bonds and investment-grade corporate bonds of the non-financial sector in the amount of £ 200 billion, funded by the issuance of central bank reserves so that the total volume of these purchases reaches £ 645 billion. Two committee members at this meeting called for an increase in the target volume of asset purchases by another £ 100 billion, "the Bank of England said in a statement.
At the same time, the Bank of England published forecasts for the UK economy, from which it is expected that the GDP will shrink by 14% in 2020, but grow by 15% in 2021. Unemployment in the country will jump to 8%, and inflation this year will be 0.6%.
"The proliferation of COVID-19 and its containment have a significant impact on the United Kingdom and many countries around the world. Economic activity has fallen sharply since the beginning of the year, while unemployment has risen markedly, "said the Bank of England.
Today, data on applications for unemployment benefits in the US will be published, which has a forecast of about 3,210,000 new applications and 20,450,000 repeated applications, which will continue to set anti-records.
Further development
Analyzing the current trading chart, we see high activity during the start of the European session, which was caused by the results of the Bank of England meeting. The local surge over 80 points did not lead to serious changes, and the quote almost immediately went into recovery mode, returning us to the same mirror coordinate at 1.2350. Such course once again proves that downward development may occur.
Thus, we can assume that the price fluctuation within the 1.2350 level will remain, in which for the downward move to resume, the quote must consolidate lower than 1.2310. The possibility of a descent to April 21's low is high in this case.
Based on the above information, we derived the following trading recommendations:
- Consider buy positions from the value of 1.2420, towards 1.2450
- Consider selling positions lower than 1.2310, towards 1.2250.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see a clear sell signal relative to hourly and daily periods, due to the general market mood.
Volatility per week / Measurement of volatility: Month; Quarter year
The measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(May 7 was built, taking into account the publication time of the article)
Volatility is currently 106 points, which is already good and is considered a normal indicator of activity. Thus, we can assume that if the variable pivot point falls, the daily average will exceed.
Key levels
Resistance zones: 1.2350 **; 1.2500; 1.2620; 1.2725 *; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support areas: 1.2350 **; 1.2250; 1.2150 **; 1.2000 *** (1.1957); 1.1850; 1.1660; 1.1450 (1.1411); 1.1300; 1,1000; 1,0800; 1,0500; 1,0000.
* Periodic level
** Range Level
*** Psychological level
**** The article is built based on the principle of conducting a transaction, with daily adjustments
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