From the point of view of complex analysis, you can see the upward inertial course, which returned the quote to the limits of previously passed levels, and now let's talk about the details. The past trading day managed to locally extend the previously specified upward move, but the activity of buyers declined at the same time, and the subsequent consolidation formation of two-digit Doji candles was damaged. It is worth noting that the slowdown coincided with the area of interaction of trade forces 1.2240/1.2280, which is confirmed on history by sections of April 6, April 21, and May 7.
Considering the fluctuation from the point of view of graphical analysis, it can be assumed that the inertial course refers to the structure of the "Double Peak" pattern execution, where a correction wave appeared after the breakdown of the pattern, returning the price to the limits of the pattern base point. In this case, the area of interaction of trade forces 1.2240 / 1.2280, which also plays the role of the foundation of the Double Top pattern, will serve as a kind of resistance level, returning market participants to a minimum point.
Regarding the theory of development, we still consider the downward trend as a prospect for the future, where the tact has already been set, it remains only to wait for the execution of the theory. It is worth considering that although the theory of downward development has the main prospect in the market, it is not necessary to exclude from the work local operations that, on the way to fulfilling the medium-term position, bring considerable income to the trade deposit.
Analyzing the past minute by minute, it can be recalled that a surge of activity was noticed only at the start of the European session, which coincided with the flow of news in this period. The subsequent fluctuation had the form of consolidation with variable boundaries of 1.2215 / 1.2270 (1.2294).
As discussed in the previous review, the main transactions of traders were aimed at the recovery process, but the quote failed to consolidate below 1.2215, thereby transferring tactics to the next day.
In terms of volatility, we continue to record indicators above 100 points, which is considered a good signal in terms of market interest. It is worth considering that the adaptation of the market to the external background is still at the implementation stage, but there is significant progress relative to March.
Considering the trading chart in general terms [the daily period], it is worth noting the tact of May 1, which is now the main one in the structure of the downward development. At the same time, the tact is supported by the global trend, as well as external factors.
The news background of the past day contained data on the UK labor market, where the number of applications for unemployment benefits for April amounted to 856,500, which is several times higher than during the 2008-2009 crisis. At the same time, the unemployment rate fell from 4.0% to 3.9%, but it is worth considering that the data came for March, and not for April. Thus, the consequences of quarantine measures await us in the next period, and believe me, the indicators will be scary.
In terms of the general information background, we have a range of colors expressed in the problems of the United Kingdom, where the coronavirus crisis only worsened the precarious construction of the country's economy. So, we will talk about the "divorce" process of Brexit again, which even before the crisis brought difficult times for British business, and with the advent of the coronavirus unemployment intensified, which can greatly harm enterprises in preparing for the Brexit process. Thus, there is not enough time for proper preparation, and if by some miracle England manages to conclude a deal before the end of the year, then British businesses will fall into a local shock, paralyzing a number of essential work processes.
The best solution at this time would be to extend the transition period, which the EU insists on, but England and the followers of the quick exit are not embarrassed by any problems, perhaps they are waiting for a concession from the EU, on which the current negotiations are based.
The British Brexit negotiator, David Frost, wrote in a letter to his European Union colleague Michel Barnier that the European Union is offering a low-quality agreement and is unfair.
"In general, at the moment, negotiations are not proposing fair free trade relations between close economic partners, but a relatively low-quality trade agreement consisting of unprecedented EU supervision over our laws and institutions," David Frost said in a letter.
It is worth considering that in this battle, neither side wants to compromise, thereby delaying negotiations.
In turn, the British government on Tuesday announced a new tariff regime after Brexit, which will replace the external tariff of the European Union from January 1, 2021. Here's what was written in the statement:
"It will remove bureaucracy and other unnecessary barriers to trade, reduce pressure on prices, expand consumer choices and support the British industry in competition on the world stage,"
The new tariff regime says that 60% of the goods will go to Britain without tariff on the terms of the WTO or through the existing preferential access from January 2021. Successful negotiations on an FTA [Free Trade Area] will increase this figure.
Today, in terms of the economic calendar, the final data on inflation in Britain was published, where the decline was from 1.5% to 0.8% with a forecast of 0.9%. The worst results immediately put pressure on the pound.
Further development
Analyzing the current trading chart, you can see a slight surge in the activity of short positions against the background of the news flow, where the quote returned to the lower boundary of the variable range 1.2215 / 1.2270 (1.2294). In fact, we still have not started the recovery process, which means that if the price goes out of the range, with a consolidation lower than 1.2215, there is an impressive chance to return to the values of 1.2180 - 1.2150.
In terms of the emotional component of the market, a high coefficient of speculative positions is recorded, which is confirmed by volatility on a daily basis.
It can be assumed that price fluctuations within the range of 1.2215 / 1.2280 will still remain in the market, where the main tactic will be the recovery process towards the level of 1.2150.
Based on the above information, we derive trading recommendations:
- Buying positions should be considered in terms of prolonging the inertial course against the background of an external flow of information, if such an impact factor appears on the market. In this case, we consider the consolidation point above 1.2300, towards 1.2350.
- Selling positions should be considered as the main transactions in terms of recovery, where at first they enter below 1.2215, in the direction of 1.2180 - 1.2150. Then, in case of price consolidation lower than 1.2140, the movement towards 1.2080 - 1.2000 is considered.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments on hourly periods still retain a buy signal, reflecting an upward inertia, while daily periods maintain a downward mood, reflecting the main direction of the price.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(May 20 was built taking into account the time of publication of the article)
The volatility of the current time is 54 points, which is considered a low indicator relative to the average daily value. It can be assumed that if the price moves out of the variable range, volatility will increase significantly.
Key levels
Resistance Zones: 1.2250; 1.2350 **; 1.2500; 1.2620; 1.2725 *; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Areas: 1.2250; 1.2150 **; 1.2000 *** (1.1957); 1.1850; 1.1660; 1.1450 (1.1411); 1.1300; 1.1000; 1.0800; 1.0500; 1.0000.
* Periodic level
** Range Level
*** Psychological level
**** The article is built on the principle of conducting a transaction, with daily adjustment
