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Over the last trading day, the EUR/USD currency pair showed high volatility of 63 points, as a result of which an interesting impulse move took place, which we will analyze in the current article. From technical analysis, we see that the price fixation below the control point of 1.0900 was false, since already within the value of 1.0880 there was a stop with the subsequent return of the quote to the previously passed support point. So, if we analyze the past fluctuation in detail, we will see that the main surge occurred in the period from 17:00-19:00 (time on the trading terminal) and, most likely, was tied to the information and news background, but more on that later. Thus, if we refer to a local burst, we see that the picture of cycles, in general, has not changed.
As discussed in the previous review, traders were mostly focused on short positions, where entry into the market was made at the time of fixing the price below the mark of 1.0900. The primary perspective, in this case, was located in the area of 1.0850 but was not achieved.
Looking at the trading chart in general terms (daily period), we see that the momentum tact in the global downward trend continues to hold in the market. In this case, a significant role of further development will be played by the behavior of the price relative to the current coordinates, since the pivot point of 1.0900/1.0950 has not yet been sufficiently played by the quote in terms of decline, and there is still some caution of the reverse return.
The news background of the past day had a significant package of statistics. So, the statistics started in Europe, where inflation data was published, which showed a slowdown from 1.0% to 0.9% with the forecast for holding the inflation rate at 1.0%. To a large extent, the results that we saw were expected. Yesterday, we referred to the preliminary data on inflation in Germany, which showed a decrease, and, as a fact, they affected the indicators for the EU. In turn, the single currency did not respond to the slowdown in inflation, probably because of the previously laid expectations. In the afternoon of Tuesday, data on the manufacturing activity index in the manufacturing sector (PMI) of the United States were released, where they expected growth to 50.1, but the PMI data from ISM showed the opposite picture in the form of a decrease from 49.1 to 47.8, actually rendering local pressure on the American dollar.
In terms of the information background, we had quite a lot of different bursts, which certainly affected the behavior of the quotes. So, one of the first to stand out was the head of the ECB, Mario Draghi, were at his last speech in this position, he explicitly announced a possible further reduction in the interest rate.
After that, US President Donald Trump woke up, who, without violating the old tradition, decided to criticize the Federal Reserve.
"As I expected, (the head of the Federal Reserve) Jerome Powell and the Federal Reserve have allowed the dollar to become so strong against all other currencies that our producers are experiencing (this) negative impact. The stakes are too high! They are the worst enemies of themselves, although they have no idea about it. What a pity!", – twitter @realDonaldTrump
But this does not end the information background since the long-playing Brexit almost daily feeds us with new information. So, information appeared that on October 2, British Prime Minister Boris Johnson will unveil his proposal for the Brexit of the European Union, and it will carry an ultimatum character: "Accept" or "Leave".
Chancellor Angela Merkel, who, during a meeting with the heads of international financial and economic organizations, stated that the world economy is in a difficult situation and a culprit is several factors in the form of a trade war between the US & China; Brexit.
"We had a discussion during which we unanimously concluded that the world economy is in a difficult situation. Everywhere, according to the assessment of all organizations, there is a slowdown. We, in Germany, see this through our forecasts. This applies to all important world players," the German Chancellor said.
Today, in terms of the economic calendar, the focus is on the ADP report on the level of employment in the private sector of the United States. According to preliminary forecasts, they expect a decrease in employment by 140 thousand, which can put pressure on the US currency in case the forecast coincides. Let me remind you that the report of the United States Department of Labor will be published on Friday (October 4).
Further development
Analyzing the current trading chart, we see that a slight stagnation (1.0925/1.0940) during the Pacific and Asian trading sessions led to a regrouping of trading forces and, as a fact, a breakdown of the lower border. We see a belated reaction to the information background, expressed in a local surge. In turn, traders continue to hold short positions, almost being at zero. At the same time, placing a restrictive stop-loss order in case there is another return of the quote above the point of the previously passed support.
It is likely to assume that the range level (1.0900/1.0950), which has already been repeatedly discussed, will not let us go so quickly, and tightening into its framework is still possible. Thus, we monitor the behavior of quotes and fixing points and do not forget about the restrictive stop loss. The main trend is set to decrease, but local changes are possible.
Based on the above information, we will derive trading recommendations:
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that the indicators on all analyzed time intervals signal a further downward trend, which reflects in some sense the general background of the market. It is worth taking into account such a moment, in the case of hovering within (1.0900/1.0950), the indicators for the short-term and intraday periods can be volatile.
Volatility per week / Measurement of volatility: Month; Quarter; Year.
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 2 was built taking into account the time of publication of the article)
The volatility of the current time is 37 points, which is the average for this period. It is likely to assume that if the fluctuations remain within the existing framework, volatility will be limited, but at the time of the release of the ADP report, there may be local spikes.
Key level
Resistance zones: 1.0900/1.0950**; 1.1000***; 1.1100**; 1.1180*; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100
Support zones: 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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