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The downward interest ruled the market since this trading week started, during which the correctional movement from the local low of 1.1612 concluded that the coordinates 1.1830, which is part of the area of interaction of trading forces 1.1800 // 1.1810 // 1.1830, played the role of the resistance level. The recovery process regarding the correction has already acquired a scale of 65%, but the price is still facing an important support level of 1.1700, which affects the volume of short positions.
Theoretically, the downward interest will be enough for the breakout of the control level, since after the breakdown of the side channel 1.1700 / 1.1810 / 1.1910, the level of 1.1700 has lost that very stability, which can make sellers confident to its next attack.
Analyzing yesterday's fifteen-minute TF, a round of short positions appeared on the market during the start of the European session and lasted until 13:00 UTC+00. During this time, there was a formation of an inertial move, which brought the quote to the area of the reference support level of 1.1700 (1.1690/1.1700).
In terms of daily dynamics, a slight high volatility indicator was recorded yesterday - 69 points, but it was also enough for speculative activity for smaller time frames.
Looking at the trading chart in general terms (daily period), you can see the same recovery process in relation to the corrective course in its full scale. If the recovery theory is confirmed, sellers will have a chance not just to restore their positions, but to jeopardize the medium-term upward trend set in the market during the spring of this year.
Yesterday's news background included weekly data on applications for unemployment benefits in the US, where both growth and reduction in their volume were recorded. So, to begin with, it is worth highlighting that repeated orders continue to decline rapidly and have practically exceeded the psychological mark of 10,000,000 (11,183,000 ---> 10,018,000). At the same time, Initial applications reflected a slight increase from 845,000 to 898,000, but in this case, the advantage is on the side of repeated applications, which played in favor of the strengthening of the USD.
With regard to information noise, there is a strong negative background based on COVID-19, where a lot of publications have appeared in the media regarding the worsening situation in Europe. Therefore, Europe's leaders are preparing their countries for "difficult and gloomy weeks." The EU countries update their infected cases daily, and the negative statistics are followed by new/repeated restrictive measures, which scares investors and forces them to shift their assets to safer directions, in this case we are talking about the US dollar.
For the economic calendar, we have inflation data in Europe today, where deflation and its acceleration from -0.2% to -0.3% will be discussed, which is considered a negative factor for the European currency.
In the afternoon, US retail sales is expected, the growth rate of which may slow down from 2.6% to 2.2%, but given the scale of negativity in Europe, everything may play out differently for traders.
In terms of statistical data, they will not be particularly important for the next trading week. Instead, we will have a wide flow of information related to Brexit, COVID-19 and US elections.
[All time zones are in Universal time]
Tuesday, October 20
USA 12:30 - Number of building permits issued for September
USA 12:30 - The volume of construction of new houses for September
Thursday, October 22
USA 12:30 - Claims for unemployment benefits
USA 14:00 - Sales in the secondary housing market for September
Friday, October 23
EU 11:00 - Preliminary Markit Services PMI for October
USA 13:45 - Preliminary Markit Services PMI for October
Further development
Analyzing the trading chart, price fluctuations within the area of the support level of 1.1700 (1.1690/1.1700) can be seen, which is expressed in stagnation/pullback in the market.
The downward interest is also visible, but the main signal will only be received after the price consolidates below 1.1685 in the four-hour TF, which will lead to activation of the main volumes of short positions. It is quite risky to enter the market ahead of time, since the natural basis associated with the level of 1.1700 has been on the market for a long time, and a rebound from it should be considered also. Alternatively, we can consider the prolongation of the existing pullback towards the range of 1.1735-1.1750, if the price consolidates above 1.1715.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on minute TF have a variable buy/sell signal, due to the current slowdown. In turn, hourly and daily TFs have already taken the downside, but the signal will only be confirmed after the price consolidates below 1.1685.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The volatility measurement reflects the average daily fluctuations, calculated per Month / Quarter / Year.
The current time volatility is 21 pips, which is 72% below the average. Meanwhile, a slowdown can act as an impulse for trade forces, leading to a new round of acceleration in the market.
Key levels
Resistance zones: 1.1810; 1.1910; 1.2000 ***; 1.2100 *; 1.2450 **; 1.2550; 1.2825
Support zones: 1.1700; 1.1650 *; 1.1500; 1.1350; 1.1250 *; 1.1180 **; 1.1080; 1.1000 ***.
* Periodic level
** Range level
*** Psychological level
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