From the point of view of complex analysis, you can see the V-shaped recovery, and now let's talk about the details.
The trading week is coming to an end, it's time to sum up the preliminary results, so the past days were extremely volatile. The quote initially developed the area of 1.2150/1.2180 and jumped up, updating the maximum of the past week [May 19-1.2294]. After that, against the background of inertia, the level of 1.2350 was reached, where it was developed very accurately in the downward direction and against the background of new inertia, the quote declined to the area of 1.2200.
At this stage, a V-shaped mirror formation was formed with incomplete development, where activity did not decline, but, on the contrary, increased, forming a positive V-shaped formation in 27 hours, thereby returning the quote all to the same level of 1.2350.
Such a rapid desire of buyers to pull the quote as far as possible is connected with the sale of the US dollar, which is felt throughout the market.
If we make a comparative analysis with the EUR/USD currency pair, we will see that the clock components are changing, but so far the GBP/USD pair is following the traces of the previous tacts. Thus, fundamental changes are not observed, and the quote, although returned to the dynamics of the previous flat formation, still retains the potential for a downward development.
Analyzing the past trading day in detail, you can see that the surge in long positions came at a period of 11:00-16:00 UTC+00 due to which the quote returned to the level of 1.2350 and thereby completed the V-shaped pattern.
In terms of volatility, acceleration is recorded for 3 working days, where the daily indicator does not fall below the 100 point mark. At the same time, the speculative activity coefficient continues to be at a high level, as evidenced by the dynamics of the market.
As discussed in a previous review, traders worked on local operations, considering market entry relative to the boundaries of 1.2240/1.2295.
The recommendation from Thursday regarding local transactions coincided, having a slight increase in the trade deposit.
[Buying positions are considered higher than 1.2300, with the prospect of a move to 1.2350.]
The news background of the past day played a major role in the dynamics of the market. So, yesterday, there was a wide package of statistical data on the United States, which confirmed not the best expectations of market participants. The second estimate of US GDP for the first quarter turned out to be worse than the forecast, a slowdown in the economy to -5.0%, which scares more the already frightened investors. After that, data were released on durable goods, which declined another -17.2%, and with such indicators, it is extremely difficult to talk about the restoration of market sales. The point in this nightmare was the indicator for unfinished housing sales, where the decline was -33.8%.
Now, we understand the reason for the sale of the US dollar.
In terms of the general information background, we have a statement by British Prime Minister Boris Johnson regarding the partial lifting of quarantine measures. So, from June 1, some stores will open that sell non-food products. Meetings of up to six people will also be allowed and schools will open for more children than is now provided.
Quarantine measures did much harm to the already unhealthy economy of the United Kingdom, so yesterday, Michael Saunders, member of the Bank of England's monetary policy committee, said during a video broadcast on the Internet that it would take about 2-3 years to recover from the coronavirus crisis.
"Although restrictions will be relaxed, households and companies will continue to face significant uncertainty and negative macroeconomic risks, for example, from fear of further job losses or business failures, and also because of the possibility of a new outbreak wave COVID-19, requiring restrictive measures," said Saunders.
Today, in terms of the economic calendar, we do not have the attention of statistics on Britain and the United States, thereby all emphasis will be on the external background, as well as on technical factors.
The upcoming trading week in terms of the economic calendar is very busy. So the start of the week is highlighted by PMI data. The middle of the week gives us an ADP report on the level of employment, and the finish is the report of the United States Department of Labor, and that's not all, since the negotiations between England and Brussels on the Brexit agreement will start next week.
The most interesting events displayed below (Universal Time) --->
Monday, June 1
Great Britain 8:30 - Manufacturing PMI (May)
USA 14:00 - The index of business activity in the manufacturing sector (PMI) from ISM (May)
Tuesday, June 2
United Kingdom 8:30 - The number of approved mortgages (Apr)
United Kingdom 8:30 - The volume of mortgage lending (April)
Wednesday June 3
United Kingdom 8:30 - Services PMI (May)
USA 12:15 - ADP Report / Change in the number of people employed in the non-agricultural sector
USA 14:00 - Volume of industrial orders (m / m) (Apr)
Thursday, June 4
ECB meeting - 11:45
Great Britain 8:30 - Index of business activity in the construction sector (May)
USA 12:30 - Applications for unemployment benefits
Friday June 5th
USA 12:30 - report of the United States Department of Labor
Further development
Analyzing the current trading chart, we can see another slowdown within the level of 1.2350, where the quote is trying to form a rebound, but so far to no avail. In fact, market participants, seeing sales of the US dollar and dramatic changes in the euro/dollar pair, want to see something similar for the pound sterling, but common sense prevails, extinguishing the enthusiasm of insatiable speculators.
At the same time, there is a rather large distance from the dramatic changes, as we mentioned earlier that the quote supposedly returned to the framework of the previous flat formation 1.2150 // 1.2350 / 1.2620, which means that there is scope.
Having this activity, it is worth continuing to follow local operations, since they are the most interesting in the market at the moment.
We can assume a temporary price fluctuation in the range of 1.2305 / 1.2350, where market participants stabilize trading forces and, most likely, form an impulse move. Trading tactics will come from the method of breaking down established boundaries.
Based on the above information, we derive trading recommendations:
- We consider selling positions below 1.2300 with the prospect of a move to 1.2250-1.2200
- We consider the buy positions above 1.2365 with the prospect of a move to 1.2420-1.2440.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments on hourly and daily periods signal a purchase due to the return of the price to the region of the level of 1.2350.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(May 29 was built taking into account the time of publication of the article)
The volatility of the current time is 50 points, which is still a low value relative to the average daily indicator. It can be assumed that market dynamics will accelerate again as soon as the price rebounds from the level of 1.2350 or breaks through it.
Key levels
Resistance zones: 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