From the point of view of a comprehensive analysis, you can see a significant recovery of the quote relative to an earlier time period, and now let's talk about the details.
The last trading week had a high amplitude of fluctuation, during which the quote initially worked out a variable support point in the face of the 1.2150/1.2180 area, heading towards the resistance level of 1.2350. After that, it went into the process of the V-shaped formation 1.2350 / 1.2200 / 1.2350, completing the week with a breakdown of the level of 1.2350. Such a pronounced upward trend was characteristic of the entire market, which reflected the local sale of the US dollar. It is worth considering that the movement from downward to upward has been going on for the second week in a row, which has led to a significant recovery of the pound relative to the cycle of May 1 [05/01/20-18.05.20]. The percentage ratio of the whole process is 60%, which means that the quote has thoroughly returned to the framework of the previous flat formation.
Regarding the theory of development, we are talking only about local operations, without reference to global trends. If the assumption regarding the flat is confirmed, then we expect a return to the amplitude of 1.2150 // 1.2350 // 1.2620.
In terms of volatility, there is a slight slowdown relative to Friday, but if you consider the whole past week, the average daily indicator will be 113 points, which is already considered the norm of an active market.
As discussed in the previous review, traders are reviewing the tactics of conducting transactions for local operations, working on variable fluctuations.
The news background on Friday did not have any worthwhile statistics on Britain and the United States, thereby putting all the emphasis on the external background, as well as on technical factors.
In terms of the general information background, we have the second stage of the weakening of quarantine measures in the United Kingdom. From June 1, schools, kindergartens, street markets and car dealerships will resume work. It is worth considering that most stores will be closed until June 15. Do not forget that Britain ranks first in Europe in the number of deaths from coronavirus infection, so now it is especially important to prevent a second wave of infections.
In terms of the Brexit divorce process, the fourth round of negotiations starts, where Brussels immediately warns that it does not intend to conclude an agreement at any cost. EU chief negotiator Michel Barnier has given London an ultimatum - Britain will stick to its original commitments or remain without a deal. Barnier threatens that in this case, the official London will be the loser. At the same time, ultimatums and threats are heard from both sides, but do not forget that the June round is one of the important stages of negotiations, since there will be no possibility to postpone the exit to a later date after it.
Today, in terms of the economic calendar, we have the final PMI data in Britain, where the index of business activity in the manufacturing sector should grow from 32.6 to 40.7. A similar PMI is published in the United States, which expects growth from 41.5 to 43.0.
Further development
Analyzing the current trading chart, you can see the upward spiral, which was set during the start of the Pacific trading session, overcoming the maximum of the past week. There is an assumption that market participants are moving according to the structure of the flat formation, which means that the area of 1.2465/1.2500 will stand in the way of movement, which may locally put pressure on market participants.
In terms of the emotional component of the market, it is worth highlighting that the rate of speculative operations is at a high level, which means that market volatility will continue to increase.
It can be assumed that the quote is aimed at the area of 1.2465/1.2500, where a slowdown is not excluded, with the subsequent return of the price to the level of 1.2350 as a local correction.
Based on the above information, we derive trading recommendations:
- We consider buying positions in the direction of 1.2465/1.2500.
- We consider selling positions already in case of a rebound from the area of 1.2465/1.2500, towards 1.2350.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical tools on hourly and daily periods signal a purchase, which is confirmed by the rapid upward trend over the course of two weeks.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(June 1 was built taking into account the time of publication of the article)
The volatility of the current time is 101 points, which is already considered a kind of norm of a good acceleration. It can be assumed that there is a chance of further acceleration amid the information and news background.
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 zones: 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 based on the principle of conducting transactions with daily adjustments