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It was not an easy day, but we still managed to gain profit. Acceleration of volatility; Fed meeting; Convergence with a key resistance level and much more will be considered in our article.
From the point of view of technical analysis, we see an uneasy everyday fluctuation, and a bright rally in the market, where there was a touch of the level of 1.1080 at first, after which a surge of buyers and a jump to 1.1153. In our case, the forecast coincided 100% and the starting point from 1.1120-1.1122 was an excellent platform for new deals for the purchase, as a result of excellent entry and profit on deposit. What do we have besides momentum? - the return of the price back to the resistance area [1.1150 / 1.1180], where the recovery process had previously started. In fact, the recovery process, which lasted seven trading days, fell into existence, and thus, the oblong correction had a new chance to continue moving. In terms of the emotional state of the market, the symptoms of FOMO [Lost Profit Syndrome] reappeared, but so far, these are only prerequisites; however, in the event of a breakdown of the level of 1.1180, an aggravation can occur. In terms of volatility, there is an acceleration that we were already waiting for, citing a three-day slowdown [49 ---> 30 ---> 45 points]. Let me remind you that the theory of slowing down volatility often helps traders to determine the stages of indecision / waiting and the future jump in the market.
Analyzing the past hourly chart, we see that the main jump occurred at a time period of 17:00 - 21:00 hours [UTC+00 time at the trading terminal], which completely coincides with the results of the Fed meeting. The minimum value of the day is 1.1080 while the maximum value of the day is 1.1155.
As discussed in the previous review, many market participants already had long positions in advance, but at the same time, the point 1.1120 (1.1122) as an opportunity to top up or open new deals can be considered. In this case, the prospect was in the region of 1.1150-1.11180, where the first value was worked out almost immediately. After which there was a partial and complete exit from transactions.
Considering the trading chart in general terms [the daily period], we see that the first stage of recovery [1.1180 ---> 1.1080] was also the last. It is difficult to say now whether the oblong correction will continue its formation, since the restoration was unsuccessful. It is worthwhile to understand that the existing return to the limits of the resistance level [1.1180] was against the background of the information flow and emotions, thereby not the fact that we are still able to break through the 1.1180 level and maintain upward interest. First you need to see the formation of quotes within 1.1140 / 1.1180, since in the case of an upward turn of interests, we can see another return to the level of 1.1080. Regarding trends, there are no fundamental changes so far, and we are still in a downward trend.
The news background of the past day had a large layer of statistical data, I propose to consider everything in order. In Europe, preliminary data were published on inflation in Germany [from 1.2% to 1.1%] and Spain [0.1%, with a forecast of 0.0%]. At the same time, Germany showed the unemployment rate, where everything is unchanged at 5.0%, with the exception that the number of unemployed in October increased.
Moreover, the United States published its first estimate of GDP for the third quarter, where forecasts coincided in terms of a further slowdown in economic growth from 2.3% to 2.0%. At the same time, ADP released a report on the level of employment in the US private sector, where they expected growth of 120 thousand against 135 thousand, but they received data better than expected in the end. According to the ADP report, employment growth amounted to 125 thousand, and the previous indicators changed to 135 thousand ---> 93 thousand.
The market reaction to the statistics package was rather sluggish due to a more important event that awaited us later.
Thus, the two-day meeting of the Federal Open Market Committee came to an end, where it was announced without further surprise that the interest rate would be reduced from 2.0% to 1.75% again. What is more surprising is another, this is already the third consecutive rate cut this year, and this phenomenon, by the way, is infrequent, and here you will not know whether to rejoice or to be afraid. The decision to reduce the rate, as at previous meetings, was not unanimous: the head of the Federal Reserve Bank [FRB] Kansas Esther George and the head of the Boston Federal Reserve Eric Rosengren opposed.
What everyone expected so much was this follow-up press conference with Jerome Powell, where he emphasized the need for rate cuts to help keep the US economy strong in the face of global change.
"Today we decided to lower the interest rate for the third time this year. We have taken this step to help keep the US economy strong in the face of global change, as well as provide some sort of insurance against current risks, "a quote from a Jerome Powell press conference.
According to the head of the Federal Reserve System [FRS], lowering the refinancing rate may help bring inflation closer to the target level of 2%. At the same time, uncertainty remains regarding the increase in the price growth rate. The Fed release also said that a weakening monetary policy will support the growth of economic activity in the United States and provide conditions for a strong labor market.
It can be recalled that before the announcement of the results of the Fed meeting, many eminent media sources spread the rumor that a pause would be voiced in Jerome Powell's words regarding further actions of the regulator, but as we see from the results, this was not done.
The reaction of the market to such a strong event was in terms of local weakening of the dollar.
Today, in terms of the economic calendar, we have the first estimate of European GDP for the third quarter, where we expect a slowdown in economic growth from 1.2% to 1.1%. At the same time, preliminary data on EU inflation will be published, but everything is not so good there, a slowdown from 0.8% to 0.7%. In the afternoon, there will be data on applications for unemployment benefits: Primary +3 thousand; Repeated -2tys.
Further development
Analyzing the current trading chart, we see a characteristic stagnation of 1.1164 / 1.1170, where a local overbought formed in the pulse phase, coupled with the fact that the quote is still in the area of the resistance level, the question is ripe where the pullback is and why it is still no? In fact, what we got, the return of the price back, was this on emotions, or on data, time will judge, even though you already know my opinion - emotions and FOMO of pure water. Thus, if the plans include a further upward move. To begin with, formation should occur, and here, a pullback to the side of the level of 1.1140 is still necessary. If this is an emotion, then we will return again to the limits of the first stage 1.1080 over time.
Detailing the available time interval per minute, we saw a stretch with a slight upward stroke in the evening. After which comprehension and deceleration, this is what is already happening now. The third stage is restoration, something that has not yet begun.
In turn, speculators, having a solid profit, from long positions, went into the fixation phase just at the time of the jump and already the night session. In addition, local deals are being considered at the pullback, but they are also carefully analyzing the level of 1.1180, with a view to further purchase transactions, if such a plot does happen on the market.
It is likely to assume that this first pullback is in the direction of 1.1140, where stagnation with a rebound to 1.1180 is possible, as well as temporary accumulation, with a thorough analysis of fixation points, for further short positions. Alternative transactions, that is, to buy, are analyzed in two scenarios: first, the temporary formation of 1.1140 / 1.1180, where the border analysis is carried out; secondly, emotions that will not let the market go and give the opportunity to go higher than 1.1190.
Based on the above information, we derive trading recommendations:
- Buying positions are considered in case of a clear price fixing higher than 1.1180-1.1190, while maintaining the inertial-emotional course.
- Selling positions are considered in terms of a pullback / recovery. If we don't have any deals yet, then you can go around 1.1155, with a prospect of 1.1140. A deeper move is considered according to the circumstances and in any case is lower than 1.1140.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that the indicators on the intraday and medium-term time intervals signal an upward trend, which is quite logical due to the current market sentiment. The short-term outlook fluctuates, but still confirms the pullback stage.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 31 was built taking into account the time of publication of the article)
The current time volatility is 19 points, which is the average for this time section. It is likely to assume that in the case of a decrease in the emotional component of the market and sluggish pullback, the volatility will be at low levels in the event of a breakdown of one of the coordinates 1.1140 / 1.1180, an acceleration of volatility may occur.
Key levels
Resistance Zones: 1.1180 *; 1.1300 **; 1.1450; 1.1550; 1.1650 *; 1.1720 **; 1.1850 **; 1,2100
Support Areas: 1,1080 **; 1,1000 ***; 1.0900 / 1.0950 **; 1.0850 **; 1,0500 ***; 1.0350 **; 1,0000 ***.
* Periodic level
** Range Level
*** Psychological level
***** The article is built on the principle of conducting a transaction, with daily adjustment
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