Once again, the bears' attempt to break through the control point failed, what to expect next – walking in a tedious corridor or something more – you will find the answers to these and many other questions in the article.
From technical analysis, we see how everything has returned to normal. The wide flat formation between the two control levels of 1.2770/1.3000 torments the quote for the fourth week in a row, actually forming the ideal platform for transplanting in such an ambiguous period. About the current one, earlier we recorded a remarkable stop within 1.2815/1.2885, where the upper border was the middle of the same flat of 1.2770/1.3000. Theoretically, it was stated that the stop could serve as a platform for acceleration, which, in principle, happened, only not in the direction of the breakdown of the level of 1.2770, but the direction of further progress inside the flat. What has changed in general terms, yes, in principle, nothing, all the same, sluggish volatility, whereas early as 16 trading days we have a fluctuation with low indicators? (Dynamics of daily candles from High to Low: 58 – 65 – 97 – 62 – 75 – 45 – 67 – 58 – 53 – 83 – 53 – 118 – 58 – 40 – 63 – 51 points). By the way, just if we consider the existing movement in terms of volatility, the preservation of the flat as a movement is quite rational. That is, the decline in amplitude reflects the indecision of market participants, so we cannot overcome the given framework, and the movement within the boundaries is much easier than the breakdown.
Analyzing the hourly Friday day, we see that the main turn of the movement fell on the period of 15:30-17:00 (time on the trading terminal), where the mirror level of 1.2885 fell under the onslaught of long positions, but then the movement stopped. The causes and consequences will be discussed later.
As discussed in the previous review, some traders have taken a kind of strategic downward positions since November 12, but it is worth considering that money management is taken into account in them, thus they can sit in them for a long time without unnecessary risk. At the same time, other traders worked on both sides at once, orienting with coordinates: 1.2750 – sell and 1.2885 – buy. As we can see, the buy order (1.2885) has worked, the positions are already profitable.
Looking at the trading chart in general terms (daily period), we see that the looped sideways move of 1.2770/1.3000 continues to hold the interest of market participants, which is more of a variable platform than any movement. That is, in the current period, there was a difficult situation, the quote against the background of the information flow accelerated to unrealistic heights in a short period (10.10.19-21.10.19). At the same time, there are no clear reasons for sterling to strengthen, nor is there a global upward trend to follow. Thus, we are faced with a kind of variable platform, to restore understanding and most importantly to restore market interest, which will set the pace of the market.
Friday's news background included data on retail sales in the United States, where forecasts for a slowdown were confirmed from 4.1% to 3.1% with expectations of a slowdown to 3.8%. Almost at the same time, more data were released for the States, but for industrial production, where the decline accelerated even more, from -0.3% to -0.8%.
The market reaction to the statistical indicators coincides with the time of the weakening of the dollar (15:30-17:00 times on the trading terminal).
The information background continues to work on the news flow from the election race battles to the British Parliament. So, Prime Minister Boris Johnson said that all conservative candidates who will participate in early elections will support in the future a deal on the country's exit from the EU.
"All 635 candidates from the Conservative Party participating in these elections, all of one, gave me obligations that if they are elected, they will support my Brexit deal so that we can end the uncertainty and finally leave the EU," the Prime Minister of Great Britain said.
In turn, the leader of the British Labor Party, Jeremy Corbyn, said that if he wins the election, he will allow the citizens of the United Kingdom to decide whether they want to leave the European Union now or still regret to remain in its composition.
"For three months, we will agree on a real and meaningful exit option and put it to the vote along with the option to remain in the EU," Jeremy Corbyn said.
The new week will begin with the Prime Minister's speech at the annual conference of the UK's main business lobby group and the Confederation of British industry, where Johnson will try to win over business leaders with a tax cut proposal.
Let me remind you that earlier the head of the Labor Party, Jeremy Corbyn, threatened to impose high taxes on the rich and nationalize railways, energy, and water companies, as well as the royal post office, which frightened investors and business.
Carolyn Fairbairn, Director-General of the CBI, said on Sunday that the Laborites' announcement was "clear-sky" and made its members worry.
In terms of the economic calendar, we do not have news on the UK and the United States worth attention, thus the entire emphasis will be redirected to the information background.
Further development
Analyzing the current trading chart, we see a fairly intense upward movement in comparison with past periods, where the quote has almost managed to reach a peak on October 31. Whether buyers will be able to maintain such a rapid move, at the moment I deeply doubt that they still lack the same confidence to overcome the milestone in the face of the psychological level of 1.3000. Thus, the looped move of 1.2770/1.3000 seems to be the most optimal development. In terms of volatility, I want to say about acceleration, but so far we are still within the limited amplitude, that is, below the daily average.
Detailing the minute-by-minute movement, literally from the very morning, we have a good bullish bay, where the first jump was recorded at 09:00 (time on the trading terminal).
In turn, those traders who went into long positions at the stage of passing the value of 1.2885, moved to partial and full fixation of previously received profit in connection with the risk of another mining of the upper border of the flat.
Having a general picture of the actions, it is possible to assume that the repetition of the plot of the past is possible in this case, where the values of 1.2970/1.3000 can play a role of resistance, returning sellers to the market. In this case, traders are advised to carefully look at the behavior of the quotes and identify the most optimal point for sale. In this case, there is always a second side, it is a breakdown of the key level of 1.3000, but while there are no signals for such a step, it is also worth tracking this variation.
Based on the above information, we derive trading recommendations:
Buy positions are already being maintained, where partial and full fixation of previously received profit is made. A deeper move will be considered after a clear fixation of the price above 1.3000. We analyze the positions for sale in the areas of 1.2960/1.2975, as well as 1.2975/1.3000, for slowing down and attempts to reverse.Indicator analysis
Analyzing a different sector of timeframes (TF), we see that indicators due to the reverse within the flat turned local interest from descending to ascending relative to all major periods.
Volatility per week / Measurement of volatility: Month; Quarter; Year.
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(November 18 was built taking into account the time of publication of the article)
The volatility of the current time is 59 points, which is the average value for this period. It is likely to assume that the convergence of the daily average is possible, but then we are faced with a psychological level of 1.3000. A clear acceleration of volatility can occur in the event of a breakout of the reference value.
Key levels
Resistance zones: 1.3000; 1.3170**; 1.3300**.
Support zones: 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
*** The article is based on the principle of conducting transactions, with daily adjustments.