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The psychological level of 1.1000 serves as a reference point, in which direction you should expect an acceleration of the breakdown/rebound – we will answer this question in our article.
From technical analysis, we see how the psychological level concentrates market participants on itself for several days in a row. On the one hand, we have almost completed the second stage of recovery relative to the oblong correction, where there is a stable downward interest. On the other hand, the control level of the second stage (1.1000, escalates fear into market participants, which does not allow as quickly as many would like to go through such an ill-fated process. It turns out that we are walking on a conditional boundary, where, with the slightest advantage of the trading forces, a local surge may well form. In terms of volatility, we encountered such a weak indicator of 25 points (on November 13), that I can't remember in terms of statistics when this happened again. This phenomenon in terms of extremely low indicators often signals the readiness of the market to jump. In terms of the emotional component of the market, we have a pretty good recovery, it may seem strange due to the decline in volatility, but still, the quote is not squeezed into the conventional framework of the sideways move, there is a certain cyclicality and direction.
Analyzing the hourly past day, we saw an extremely weak fluctuation by market standards, but it's worth paying tribute to, even with this amplitude, interest remained in the downward phase, concentrating on the psychological mark of 1.1000. There were no jumps or impulses; the hourly average candle weighted 6 points.
As discussed in the previous review, traders are divided into two groups, some remain faithful to short positions, although they use a conservative method of money management. Others, on the contrary, decided to work on the breakdown/rebound method relative to the psychological level of 1.1000. In principle, the tactics of both of them are clear to me, but nevertheless, in such tasks, it's worth personally setting the scope for perspectives for yourself, what do you expect and how long do you plan to work in one direction or another.
Looking at the trading chart in general terms (daily period), we see the recovery process relative to the oblong correction, which already lasts nine trading days (conditionally from the progress of the breakdown of the first stage). If you switch to the overall picture of cycles and trends, there is always a downward trend. Let me remind you that the pivot point of the current trend is the value of 1.0879, which was formed on October 1, 2019.
The news background of the past day had inflation data in the United States, where the outcome was a shock to everyone. Initially, we expected the inflation rate to remain at 1.7%, at the same time, there were rumors that a decrease to 1.6% was possible. As a result, we got neither one nor the other; inflation grew to 1.8%. Seeing such indicators and a complete discrepancy of expectations, we can say that for the US dollar, a white streak has come and a sharp strengthening of the green paper awaits us, but it wasn't there. It was as if a stupor had struck everyone, including the market, there was no reaction, from the word in general.
The information background included the start of a two-day meeting in the US Congress, where Fed Chairman Jerome Powell will address the Joint Economic Committee. From Powell's comments, it can be noted that, from his point of view, the regulator's path has been chosen correctly, a flexible monetary policy will help support the economy and enable it to grow.
"We believe that the current position of monetary policy is likely to remain appropriate as long as the incoming economic information is broadly consistent with our forecasts of moderate economic growth, a strong labor market and inflation close to our symmetric 2 percent target," the head of the Fed said.
He also noted that the regulator's words tend to have a lagging effect, meaning it will take time to assess what impact they have.
In turn, news emerged from the fields of the US & China trade war. According to the official representative of the Ministry of Commerce of the People's Republic of China, Gao Feng, the negotiators are actively considering the issue of mutual removal of increased duties.
"The abolition of higher tariffs should fully reflect the significance of the first stage of the China-US trade deal. Both sides are now an in-depth discussion of this issue," Gao Feng said.
In the end, a few comments regarding the beloved Brexit process. So, the former head of the European Council Donald Tusk almost expressed his opinion on Britain leaving for sunset.
"I have repeatedly heard from the Brexiters that they wanted to leave the European Union to make Britain strong and independent again, believing that a country alone can be great. However, in these statements, the yearning for the empire sounds, but in fact, the opposite is happening. Only within the European Union, within the framework of unity, can Britain play a global role. Only together can we stand up to the world's greatest powers," European Council President Donald Tusk said.
Today, in terms of the economic calendar, preliminary data on Europe's GDP for the third quarter (second estimate) have already been released. There is confirmation that the level of GDP will remain at 1.2%, although a slowdown to 1.1% was predicted. A few hours before the publication of unified data on GDP, preliminary data on the GDP of Germany were published, but there was recorded growth from 0.3% to 0.4%. By the way, for this reason, in the morning period, we saw a local jump in prices, but after which everything returned to normal. In the afternoon, we are waiting for data on producer prices in the United States, which, according to forecasts, should fall from 1.4% to 0.9%, but due to the latest data on inflation in the United States, it may be the opposite.
Further development
Analyzing the current trading chart, we see the same fluctuation within the psychological mark of 1.1000, where the quote is trying hard to reverse the existing mood in the downward direction. The deterrent factor within the level of 1.1000, as already mentioned in the previous review, is very similar to the behavior of the quote at the time of passage of the first stage (1.1080). If the theory repeats, then a repeated attempt to break the control point (1.1000) will still result in a full-fledged move, which will resume the flow of short positions in the direction of the subsequent support points: #3/1 (1.0950) and #3/2 (1.0950). In terms of volatility, there is still a characteristic weakness, but once the issue with the level of 1.1000 is resolved, we will see an acceleration.
By detailing the time interval available per minute, we see that between 09:00 - 10:00 hours (time on the trading terminal), there was a local surge in long positions, which had a short-term effect and was provoked by statistics from Germany. The next move was in terms of returning the price to the level of 1.1000, almost similar in structure candles.
In turn, traders are hoping for a repeat of the plot and yet the breakdown of the second stage of the level of 1.1000. Many market participants already have short positions, and think about topping up as soon as the quote will be able to break out of the framework of the holding accumulation. Alternative positions are considered, but, as last time, in terms of short-term trading operations.
It is likely to assume that the fluctuation within the psychological level of 1.1000 is already on its side and left to wait quite a long time. Many are now guided by the value of 1.0990, which was reflected on October 15, where there was a slight stagnation within the existing level. That is, a passage below this value to some extent may signal a level fracture, but still, it is advisable to see not just a puncture with a shadow, but an obvious move.
Based on the above information, we derive trading recommendations:
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that indicators in a single composition signal a decline. It is worth considering such a moment that in the short-term intervals the signal is not stable due to the existing accumulation within the control level.
Volatility per week / Measurement of volatility: Month; Quarter; Year.
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(November 14 was built taking into account the time of publication of the article)
The volatility of the current time is 22 points, which is still low for this period. We are waiting for the completion of the existing fluctuation within the psychological level of 1.1000, after which the acceleration of volatility is possible today.
Key levels
Resistance zones: 1.1000***; 1.1080**; 1.1180*; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.
Support zones: 1.1000***; 1.0900/1.0950**; 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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