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Last trading week passed in a phase of high fluctuations, but with all this, the movement remained horizontal. This is because speculative activity was concentrated in the upper part of the flat 1.1180 / 1.1250 // 1.1350, where a V-shaped pattern was formed twice, which did not lead to anything cardinal. The most remarkable surge in activity was observed on July 8 and 9, which suggests that the market is evolving and could lead to many trading strategies.
Thus, for the development of the market, the first plan is a horizontal move, the duration of which has already occurred more than a month. This means that the upward measures from the end of May no longer play a major role in the development of quotes.
However, it is not clear how long the quote will trade in the side channel because in the case of an upward movement, there is the conditional limit in the form of the 1.1440 / 1.1500 area, a breakout from which will lead to changes in the medium-term trend. Meanwhile, for a downward move, the market needs to reduce sales of the US dollar, and then overcome the area 1.1165 / 1.1180 / 1.1190.
Analyzing the trading last Friday in detail, we can see that a round of long positions arose at the start of the European session, which led to the quote moving to the value of 1.1324. After which there was a rollback towards the variable level of 1.1300.
It led to a volatility of 69 points, which is 12% lower than the average daily dynamics. Nevertheless, activity is within the normal range for the European currency, in which if we analyze the hourly dynamics, we will see an acceleration and speculative mood.
As discussed in the previous review, many traders were waiting for a consolidation lower than 1.1250 to open more short positions. However, such a scenario did not happen so local long-term operations were worked out instead towards 1.1300.
Analyzing the trading chart in general terms (daily period), we can see that since the beginning of 2020, the EUR / USD pair has had five inertial movements, the last of which arose just before the formation of the current flat. Based on its sequence, we can assume that today's horizontal course is a kind of platform for preparing a new jump in activity.
The news published last Friday included an encouraging data on industrial production in Italy and France, which showed that there is a gradual but still recovery, greatly pleasing investors. France, in monthly terms, has grown 19.6% in May, up from a forecast of 15.1%, while Italy set a record, listing a growth of 42.1%, much higher than the forecast of 22.8%
It led to an increase in the European currency last week.
The data on producer prices in the United States also helped the euro rise. According to the report, the indicator remained at the same level of -0.8%, which contributed to the weakening of the US dollar as experts predicted the index to rise from -0.8% to -0.2%.
Meanwhile, concerns about the recession in the European Union remains, which was voiced by the European Commissioner for Economics Paolo Gentiloni on Saturday.
"The recession is becoming deeper than expected, and the differences in the economic development of the eurozone countries are becoming more significant than anticipated. We've always confirmed that the recession caused by the pandemic threatens to tear the eurozone apart, "Gentiloni said.
To alleviate the problem, the European Commission issued recommendations to EU member states and European businesses to help prepare for the economic upheavals and trials that will occur after December 31, when the Brexit transition period ends.
Macroeconomic reports for Europe and the United States are scarce today. What traders are anticipating the most is the final data on US inflation, which will be published tomorrow.
Further development
Analyzing the current trading chart, we can see that the week began with a local rise in the euro, from which the quotes managed to overcome Friday's high during the Asian session. However, as soon as the European session began, everything changed, and the quotes rushed down, which directly reflects the speculative mood in the market. Since the fluctuations last week have high amplitudes, there is a chance that the channel 1.1250 / 1.1350 (+/- 30p) will remain, and this indicates a downward cycle.
Thus, if the quote consolidates below 1.1300, the pair will move to the average level of 1.1250, where a rebound may occur. The quote may also move within the narrow range 1.0300 / 1.1340, which will indicate the readiness of market participants with regards to the upcoming US inflation data.
Based on the above information, consider this trading recommendation:
[Sell positions lower than 1.1300, with the prospect of a move towards 1.1260]
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that the indicators of technical instruments in the hourly and daily periods signal buy but are on the verge of changing into sell, due to the return of prices in the level of 1.1300. Minute intervals, on the other hand, already signal sell due to a surge in short positions during the start of the European session.
Volatility per week / Measurement of volatility: Month; Quarter Year
The measurement of volatility reflects the average daily fluctuation calculated by Month / Quarter / Year.
(July 13 was built, taking into account the time the article is published)
The volatility at this current time is 35 points, which is 55% lower than the average daily value. Thus, it can be assumed that if the quotes consolidate lower than 1.1300, acceleration in the market may occur.
Key levels
Resistance Zones: 1.1350; 1.1440 / 1.1500; 1.1650 *; 1.1720 **; 1.1850 **; 1,2100
Support areas: 1.1250 *; 1.1180 **; 1.1080; 1,1000 ***; 1.0850 **; 1.0775 *; 1.0650 (1.0636); 1,0500 ***; 1.0350 **; 1,0000 ***.
* Periodic level
** Range Level
*** Psychological level
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