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Using comprehensive analysis, we can see the pound accelerating, where in two trading days, the quote managed to reach the critical point of breaking the Zigzag-shaped model. The accumulation within the psychological level of 1.3000 outlived its usefulness on January 30, where the first pulse was set against the background of the Bank of England meeting, which brought the quote to the area of 1.3100. The continuation of the course was expressed on January 31, where for the first time during the construction of the Z-model, the price managed to overcome the peak of the previous measure of 1.3171.
Regarding the structure of the Zigzag-shaped model, the quote went to the area of 1.3170-1.3280, which reflects the gap between the first and second bars of the model. This means that the pattern has already been broken, and we see a change in the entire structure. Regarding compression, we can see that the past two pulses confirmed the acceleration that many have been waiting for. The continuation of the upward movement will depend on the price fixing outside the 1.3170-1.3280 area, since the upward movement of the medium-term will be preserved in this case. Because of this, traders moved on to discuss a new theory that considers the zigzag-shaped model oscillation as a structure of a wide flat relative to the 1.3000/1.3300 levels.
In terms of volatility, we are recording an acceleration at the exit phase of the slowdown, where the average has been overcome in the past two days. Details: Thursday-131 points; Friday-125 points; the average daily indicator, relative to the whole analysis, is 92 points [see the volatility table at the end of the article].
Detailing the past day by the minute, we can see that a new round of jumps appeared on the market at 7:00 london time, and was held until the closing of the trading week.
As discussed in the previous review, traders considered a pullback after the first impulse, but it did not occur. After fixing the price higher than 1.3170, new long positions were opened, but with less trading volume.
Looking at the trading chart in general terms [the daily period], we see a continuing upward interest in terms of the medium-term trend, where a slowdown is formed at its conditional peak, expressed in a wide range.
Friday's news background included data on Britain's lending, where the number of approved mortgages increased from 65.51 thousand to 67.24 thousand. At the same time, the volume of mortgage lending is growing from 4.25 to 4.55.
In terms of general information background, we have Brexit accomplished, which only took 3.5 years after the referendum. Many shouted "happy ending", but it was not there, as we are moving to the next stage of negotiations. The round of which has a frame of 11 months, where everything is not so simple. To make the best deal that suits everyone, each side will have to bend, but no one is in a hurry to do it. Thus, following the text of the upcoming speech by Boris Johnson, it is clear that England will not make concessions on issues related to standards and rules in the field of competition, subsidies and social protection, as the British rules are more perfect.
"There is no need for a free trade agreement providing for the adoption of EU rules on competition policy, subsidies, social protection, the environment, or anything like that, except that the EU will have to accept UK rules," the Prime Minister is quoted saying.
Johnson also emphasized that if the negotiations fail, London will be ready to introduce full-fledged customs control at the border with the European Union. The Prime Minister is already showing his position before the start of negotiations in March.
In terms of the economic calendar, we received data on the British PMI today, where the manufacturing sector accelerated from 47.5 to 50.0 with a forecast of 49.8.
Further development
Analyzing the current trading chart, we see that entering the critical zone of 1.3170-1.3280 with local overbought led not just to a slowdown and pullback, but to a full-fledged rally, just in the opposite direction. In fact, the quote has already returned to Friday's starting area. It is worth considering that the zigzag-shaped model has already been broken, the clock component is changing, and you should be extremely attentive to the behavior of the quote. It is also worth considering that while uncertainty persists, it is time to work on local operations due to high market activity.
From the point of view of the emotional mood of market participants, we see a high coefficient of speculative operations, which gives us the opportunity to see such remarkable jumps.
Detailing the minute-by-minute portion of time, we see that the reversal movement in the form of a jump appeared at the market opening at 22:00 London time. Afterwards, there was inertia, and the market still holds it up to this moment.
As a result, speculators are actively working, flying into the market at the slightest hint of inertia.
Having a general picture of the actions, it is possible to assume that the first variable pivot point will be in the area of the morning stagnation on January 31 [1,3080/1,3100]. With respect to this area, actions will be taken in the form of fixing deals/local rebound/top-up. As you can understand, the work is being conducted exclusively on the situation, and not on the basis of trends.
Based on the above information, we will display the following trading recommendations:
- Buy positions are considered in the event of a slowdown within the 1.3080/1.3100 area.
- Sell positions are considered in the plan of fixing [partial/full] within 1.3080/1.3100, where in case of maintaining the downward mood and keeping the price lower than 1.3074, trading operations are re-opened [topping up].
Indicator analysis
Analyzing the different sectors of timeframes (TF), we can see that due to the upward inertia, the indicators of technical instruments have changed the downward interest to an upward one. As a result, the current movement has balanced the indicators, but the upward signal is still maintained.
Volatility for the week / Volatility measurement: Month; Quarter; Year
The volatility measurement reflects the average daily fluctuation, based on the calculation for the Month / Quarter / Year.
(February 3 was based on the time of publication of the article)
The current volatility is 102 points, which is already 10% higher than the average. Most likely, the positions are already overheated, and the current rally is close to the end, particularly in the case of a slowdown within the 1.3080/1.3100 area.
Key level:
Resistance zones: 1,3170**; 1,3300**; 1,3600; 1,3850; 1,4000***; 1,4350**.
Support areas: 1,3000; 1,2885*; 1,2770**; 1,2700*; 1,2620; 1,2580*; 1,2500**; 1,2350**; 1,2205(+/- 10p.)*; 1,2150**; 1,2000***; 1,1700; 1,1475**.
* Periodic level
** Range level
***Psychological level
**** The article is based on the principle of conducting a transaction, with daily adjustments.
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