From a comprehensive analysis, we see the price-fixing below the level of 1.0850, which is a good sign in terms of the development of our theory, and now about the details. The downward course set by the market on January 2 (2020) does not cease to surprise us with its pressure, where an oblong correction has already been developed, and the lows have been updated with a fix below the value of 1.0850. In fact, everything goes to the fact that the theory of the resumption of the main downward trend has the right to exist, but you should not rush into action. Caution is associated with a lot of pressure on market participants, as well as psychological ranges under the quote. It is worth considering that any movement must have cycles (Impulse-Correction), without these elements there will be no stability. Thus, the existing overheating of short positions associated with such a significant decrease can lead to a local correction/pullback, which will not bring a change in the general movement but will give it new strength.
In terms of volatility, we see a continuing acceleration that was set a day earlier. In fact, even without taking into account the last days, we see healthy activity that consistently adheres to the daily average.
Analyzing the trading chart every minute, we see that the main round of the downward movement occurred in the period of 12:30-17:00 (time on the trading terminal). The subsequent movement was in terms of the residual course, which more closely resembled slowing down.
As discussed in the previous review, traders were waiting for the moment of fixing the price below the mark of 1.0850 since this moment would reflect the continuation of the downward mood and lead to the opening of new trading positions for sale. In turn, the theory of speculative positions from the value of 1.0864 coincided, which reflected the extension of the move towards the control level.
Looking at the trading chart in general terms (the daily period), we see that the downward trend has resumed its movement, and this moment is probably only the beginning in the structure of new turns of decline.
The news background of the previous day included data on inflation in the United States, where growth was recorded from 2.3% to 2.5% with a forecast of 2.4%. The indicators that we have received are very good in terms of further strengthening of the dollar, as well as curtailing the process of reducing the Fed's rate. At the same time, along with inflation, data on applications for unemployment benefits were released, which showed a significant decrease of 59 thousand, which also has a positive impact on the US dollar.
In terms of the general information background, we have the same spectrum of noise: the upcoming Brexit negotiations; the coronavirus and its impact on the world economy; the ECB and its plans to modernize monetary policy. All these factors affect the interest of investors, as well as speculators, setting us a clock component.
Today, in terms of the economic calendar, we have already received data on the European Union, where GDP figures for the fourth quarter showed a slowdown in economic growth from 1.2% to 0.9% with a forecast of 1.0%. In fact, this is the very factor that is holding the pair back from a technical correction that is already overdue.
In the afternoon, we are waiting for data on retail sales in the United States, where they forecast a slowdown from 5.8% to 4.9%. It is worth considering that the existing forecasts for retail sales do not play in favor of the dollar, but if we consider the recent report of the Ministry of Labor, we see that the forecasts can be changed for the better.
The upcoming trading week begins with a weekend in the United States, where the Presidential Day is celebrated, which may affect trading volumes. In terms of the economic calendar, we see that the mainstream of events begins on Wednesday, where the minutes of the Fed meeting will be published, followed by the minutes of the ECB's monetary policy meeting on Thursday, and the finish line will be inflation in the eurozone.
The most interesting events displayed below:
On Monday, February 17
USA - a holiday
On Wednesday, February 19
USA 14:30 London time - Dynamics of building permits (m/m) (Jan): Prev 1.420M -> Forecast 1.450M
USA 14:30 London time - Started construction of houses (m/m) (Jan): Prev 1.608M -> Forecast 1.390M
USA 14:30 London time - Producer price index (y/y) (Jan): Prev 1.3 -> Forecast 1.4%
USA 20:00 London time - Protocol of the meeting of the US Federal Open Market Committee
On Thursday, February 20
EU 13:30 London time - Protocol of the ECB meeting on monetary policy
USA 14:30 London time - applications for unemployment benefits
On Friday, February 21
EU 11:00 London time - Inflation: Prev 1.4%
Analyzing the current trading chart, we see that the quote is concentrated within the level of 1.0850, where there is a sense of restraint. Although for a healthy downward tact, we would now see a pullback correction, however, it still does not exist, which leads to further overheating of short operations. In fact, this kind of delay can lead to even more fixations, which will not reflect well on the tact. At the same time, do not be afraid of corrections, since the descending tact has already been set, the lows of this period have been broken, and confidence in the further course is growing every day. Regarding the current component, I would like to say that a technical correction is overdue. If you use strict money management in your work, you should not be afraid of anything, keep short positions in the strategic review.
Detailing the available period every minute, we see extremely weak activity directed to the level of 1.0850.
In terms of the emotional mood of market participants, we see a significant influx of new participants, just against the background of updating the lows.
In turn, the traders continue their work based on a strategic downstream position. At the same time, having speculative operations just in case of technical corrections/rebounds.
It is likely to assume that if the data on the States come out worse, together with the overheating of short positions, as well as fixing the price higher than 1.0850, we will have an opportunity to earn on the correction. The main positions continue to work downwards towards 1.0700.
Based on the above information, we will output trading recommendations:
- Buy positions will be considered if the price is fixed higher than 1.0850.
- Positions for sale are already held by traders, but taking into account possible corrections. If we don't have any positions, we can consider the point of 1.0825 to enter the trade.
Analyzing different sectors of timeframes (TF), we see that the indicators of technical instruments are focused on the main course, signaling a sale.
Volatility for the week / Volatility Measurement: Month; Quarter; Year.
The volatility measurement reflects the average daily fluctuation from the calculation for the Month / Quarter / Year.
(February 14 was based on the time of publication of the article)
The volatility of the current time is 23 points, which is a low value, but taking into account this stagnation, together with the news background and speculative positions, it is possible to forecast that the day will end within the average daily volatility indicator, possibly above it.
Resistance zones: 1.0850**; 1.0879*; 1.0900/1.0950**;1.1000***; 1.1080**; 1.1180; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.
Support zones: 1.0700; 1.0500***; 1.0350**; 1.0000***.
* Periodic level
** Range level
*** Psychological level
***** The article is based on the principle of conducting a transaction, with daily adjustments.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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