The pound / dollar currency pair does not cease to amaze speculators with extremely high volatility. An indicator above the average is already a certain norm, and yesterday, we saw a twofold fluctuation in volume of 219 points.
From the point of view of technical analysis, we see a colossal price increase. For some five trading days, we have more than 660 points of vertical growth, where absolutely all the key coordinates for the market were broken. In fact, the price has already been fixed above the range of 1.2770, which means that the market does not even close the clock frequency of technical analysis. The absolute emotional mood of market participants - this is what we have, it pushes the quote, despite the extreme overboughtness, the importance of price levels, and the negative news background in terms of statistics for Britain, but more on that later. Emotions and hopes work wonders, what else to say.
Analyzing the past hourly hour, we see that the calm period was at the Pacific and Asian trading sessions, but as soon as Europe woke up, volatility rose again. The main fluctuations were recorded between 9:00 - 15:00 [UTC+00 time on the trading terminal], after which the quotation 1.2812 / 1.2832 quenched to a sharp compression.
As discussed in the previous review, speculators initially worked with respect to the 1.2730 / 1.2800 frames, where the quote came in during the transition from October 15 to October 16. That is, the technique is simple - identifying local outbursts relative to given boundaries, where speculators managed to catch the initial outburst down, taking about 40-50 points. After which, the news feed was monitored. This tactic has been used for more than one day, where it was again possible to ride, but it is already at the upward jump against the background of positive Brexit news.
Considering the trading chart in general terms [the daily period], we see that the conversation about changing the main trend is not just discussed, since it is widely held among traders and experts, but is that so? From the point of view of technical analysis, there is confirmation of the trend reversal due to breakdown of the second-order correction [1.2770 - 06.25.19]. From the point of view of the emotional component of the market, it is not so simple. The vertical move created on expectations can be extremely unstable in terms of long-term progress, and even if we consider shorter prospects, for example medium-term ones, and things are not so smooth, because with the slightest change in emotional mood the "Tower of Babel" can fall, and the rate of decline will be proportional to growth. Thus, I would not make hasty conclusions regarding global trend changes in the trend because we still need a little time for everything to fall into place.
The news background of the past day contained data on inflation in Britain, where they expected acceleration from 1.7% to 1.8%. However, a miracle did not happen. The data remained unchanged, 1.7%. If we can recall the UK labor market and the available indicators, the question arises, and what is the pound growing for. If the indicators are so bad, but we have already given the answer above - emotions. The statistics did not end there, the figures for retail sales in the United States came out in the afternoon, where they confirmed the slowdown, but believe me, in the case of the GBPUSD currency pair, these data did not play in the market.
The main stimulus of all past jumps was certainly the information background, in particular the Brexit process. The head of the European Council, Donald Tusk, added fuel to the fire, who said that the situation with Brexit should become clear in about seven to eight hours, that is, on Thursday morning. Against such a positive background and buyers already charged to the limits, the pound continued its upward march. The information flow did not end there. There was a statement by a number of senior politicians, the Prime Minister of Ireland Leo Varadkar during a telephone conversation with Boris Johnson was inspired to speak about success. In turn, French President Emmanuel Macron during a joint press conference with German Chancellor Angela Merkel said: "We hope and wish to sign an agreement that will be found, I hope, in the coming hours.
All this, of course, is wonderful. The work process is in full swing, but whether it will then be possible to extend this project through the Parliament of the Brotherhood and enlist the support of the Democratic Unionist Party of Northern Ireland, this remains a question.
Today, in terms of the economic calendar, we have data on retail sales in the UK, where they expect acceleration from 2.7% to 3.2%, which will be quite surprising if the data is confirmed. In the afternoon, we are waiting for a package of statistics on the construction sector in the United States, where, according to preliminary forecasts, they do not expect positive data. The key event of the day is the start of the summit of the European Council, where the Brexit issue will be resolved, It can be recalled that it will last two days, October 17 and 18. Thus, the pound will continue its swing on the information background.
Further development
Analyzing the current trading chart, we see a local decline of the quotation within the range of 1.2770, after a bright stop during the Pacific and Asian trading sessions. In fact, and what was to be expected, I personally have no surprise at this local surge, the overbought rate rolls over, and the sudden stop with an amplitude of 20 points [1.2812 / 1.2832] said for itself - wait for a surge in the morning.
In turn, speculators are already accustomed to getting up early in the morning, as they are able to pick up easy profits early. The speculators regard further actions in terms of fixing existing short positions and monitoring the information background for statements regarding Brexit.
It is likely to assume that the current fluctuation is only the beginning, as the end of the week is expected to be extremely volatile due to the EU summit. Thus, the tactics for the coming days are as follows, we monitor media sources [Bloomberg, Financial Times, Reuters], and, depending on the information, trading operations will be carried out. That is, positive comments push the pound up, negative ones hold back growth and reduce it. From the point of view of technical analysis, work is carried out on pulses, locally entering them. A partial recovery is currently underway, probably in the direction of 1.2700.
Based on the above information, we concretize trading recommendations:
- We consider the positions for the purchase at the next statement in the media regarding the success of Brexit. From the point of view of technical analysis, we can consider the existing local peak of 1.2875, fixation above it.
- Sales positions are already available from the stagnation point, with the prospect of a move to 1.2725-1.2700. Further actions depending on the incoming information. In the event of a negative Brexit outcome, the rally down will be in terms of the emotional and inertial course, that is, 200-350 points.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that indicators in the short term signal sales due to a local downward surge. On the other hand, intraday and medium term focuses on earlier impulses. Due to the strong informational background, indicator analysis can jump alternately, misleading us.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 17 was built taking into account the time of publication of the article)
The volatility of the current time is 83 points, which is quite a lot to start the day. It is likely to assume that due to the persistent information background, volatility will remain at a high level.
Key levels
Resistance zones: 1.2770 **; 1.2880 (1.2865-1.2880) **.
Support Areas: 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
*** The article is built on the principle of conducting a transaction, with daily adjustment