From a complex analysis, we see the long-awaited touch of the psychological level of 1.1000, where the quote almost immediately reacted with a rebound, signaling indecision. The entire day yesterday was marked by extreme caution by market participants, conditionally having a sideways movement with a low amplitude, where the touch of the level of 1.1000 was in the testing plan, no more than that. The pattern associated with the psychological level of 1.1000 has been haunting the market for a very long time, where there has not been a case in history when the level has not led to interaction with it of market segments.
In terms of the theory of the recovery process relative to the oblong correction, we see the concentration of trading forces at the second stage, which signals the stability of the tact set by the market at the beginning of January. This is the second attempt on the history of the oblong correction when the quote tries to form a recovery process. The first attempt was at the end of autumn 2019, but unlike the current one, we did not have such a detailed inertial course at that time.
In terms of volatility, there was a sharp slowdown that lasted for the second day in a row (28 points - Monday; 27 points - Tuesday). This kind of slowdown confirms the indecision theory, where traders are waiting. At the same time, the compression of the quote, as well as the absence of any reaction, signals an accumulation that will result in acceleration.
Analyzing the past day by the minute, we see an amplitude of 1.1000/1.1025, where the whole day can be described as a V-shaped formation.
As discussed in the previous review, traders fixed their short positions as soon as the quote got close to the psychological level of 1.1000. The next steps were in the waiting plan, where the focus was on the index of 1.0980, which was considered for further downward positions.
Looking at the trading chart in general terms (the daily period), we see that the recovery process is maintained on the market as early as 19 trading days in comparison with the previous attempt, where the recovery process ended on day 8.
The news background of the previous day included data on orders for durable goods in the United States, the volume of which increased by 2.4%. Relative to the previous data, we have a significant improvement, if we take into account the fact that the data for November was revised even worse -2.0% -> -3.1%. Also in the US, we published data on house prices (S&P/Case-Shiller), where expectations coincided and we saw an acceleration from 2.2% to 2.6%.
There was no market reaction to good statistics, which once again suggests a waiting process.
In terms of the general information background, we have nothing new. The whole world is actively discussing the coronavirus, trying to write off problems that arise in completely different areas of activity on its basis. The reaction to the market may happen in the future, but the credit for this will be from the media, which managed to inflate the noise to immense heights. The most interesting areas in the form of market reaction will be pharmaceutical corporations, which against this background will receive new injections and, as a fact, the growth of shares, but this is another story.
Today, in terms of the economic calendar, we have the most important event of the week - the meeting of the Federal Reserve System (FRS). This is the first meeting this year, and if we refer to the results of the December meeting, we will see that the regulator refrains from acting, which will continue for a long time. At the same time, many surveys confirm the opinion that the rate will remain unchanged. The most interesting moment for investors will be the comments of the regulator at the subsequent press conference after the announcement of the bid. The Fed wants to hear plans for further actions and whether the existing interest rate level will be maintained.
20:30 London time - press conference of the Federal Open Market Committee of the Federal Reserve.
Further development
Analyzing the current trading chart, we see the price fluctuation within the psychological level of 1.1000, where the desire to continue the recovery process persists as never before. This is a rare moment when the market continues to maintain volumes. Perhaps the past two days, which were expressed in accumulation, helped the market to develop a platform.
In terms of the emotional component of the market, we see the high activity of speculative positions that are eager to ride the local jump caused by the upcoming Fed meeting, as well as two-day accumulation.
Detailing the minute-by-minute trading day, we see that the downward interest at a small amplitude was set at the time of the Pacific trading session and is held to the current moment.
In turn, traders are on a low start, as acceleration can happen very soon, where the main positions are downwards, and long operations are considered as local speculative positions.
It is likely to assume that the quote will continue to wander uncertainly along with the psychological level, where it is not necessary to make hasty actions. Our task is to catch the momentum that will lead to a full move. If you follow the recovery theory, then the quote should be fixed below 1.0980. In this case, the probability of a move to the steps #3/1-1.0950 and #3/2-1.0879 will be much higher. Alternative positions are considered in case of wordplay at the time of the Fed's press conference, where if the price is fixed higher than 1.1040, local purchase operations will take place.
Based on the above information, we will output trading recommendations:
- Buy positions will be considered in case of a rebound from the psychological level of 1.1000 and a price fix higher than 1.1040.
- Sell positions are considered if the downward interest is held and the price is fixed below 1.0980, without the shadow piercing the candle. The perspective of the move is located in the following stages: #3/1-1.0950 and #3/2-1.0879.
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that the indicators of technical instruments are directed in a downward direction relative to all the main time intervals, which corresponds to the general market interest.
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.
(January 29 was based on the time of publication of the article)
The volatility of the current time is 33 points, which is already higher relative to the past days. It is likely to assume that against the background of technical and fundamental factors, the quote has a chance of accelerating during the current day.
Key levels
Resistance zones: 1.1000***; 1.1080**; 1.1180; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.
Support zones: 1.1000***; 1.0900/1.0950**;1.0850**; 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.