From the point of view of complex analysis, we can see the high activity during the publication of important data, where market participants pushed the quotes closer to the area of interaction of trading forces.
The past trading day would not have been so interesting if it had not been for the FOMC meeting, where literally for three five-minute candles, the quote managed to show activity of 100 points. The fluctuation first saw a surge of short positions by about 40 points for two minutes, after which there was a surge of long positions by 90 points. The quote was able to locally update its maximum, reaching the level of 1.1422.
Such a movement does not consider yet a dramatic change in the trend, since it is still insignificant to the entire market course even if the subsequent correction returned the quote to the area of fluctuation at the beginning of the week. The only thing that is important is the slowdown that started since Monday, in which long positions are overheated and the area of interaction between the trading forces 1.1440 / 1.1500 is concentrated above the quote.
With regards to further movement, opinions differ since some believe on a change in medium-term measures, while others depend on local speculative activity. Both beliefs are true, but some clarifications are needed since to change the medium-term course, the quote must consolidate first above the value of 1.1500 in the daily period. Otherwise, the fluctuation will only be similar to the peak on March 9.
As discussed in the previous review, traders carefully analyzed the dynamics and behavior of the market relative to the area of interaction of trading forces, as this may become another starting point for new transactions.
In terms of volatility, an acceleration of 13% is recorded relative to the average daily indicator, which indicates the prevailing speculative mood of market participants. If we consider the dynamics from the beginning of the month, the indicator will be at 96 points, which confirms the judgment of speculators.
Meanwhile, the news published yesterday contained data on inflation in the United States, which revealed a decline from 0.3% to 0.1%, worse than the forecast of 0.2%.
Nevertheless, market reaction to such statistics was non-existent, as market participants were in a standby mode.
The main event of yesterday was the FOMC meeting, which announced the decision of keeping interest rates at the same level of 0-0.25%. The decision was made against the backdrop of the ongoing health crisis, which, according to the regulator, will significantly affect economic activity, employment and inflation, and also create significant risks for economic prospects in the medium term.
"The outbreak of coronavirus causes tremendous human and economic difficulties in the US and around the world. The virus and the measures that have been taken to protect public health have led to a sharp decline in economic activity and significant losses in the labor market. Weak demand and a significant drop in oil prices are holding back consumer prices. Financial conditions have improved, partly due to measures to support the economy and the flow of loans to American households and businesses, "the Fed said in a statement.
All 17 members of the Fed committee believe that the interest rate will remain at the same level until 2022. Additional quantitative easing in the future was also out of picture.
In other words, the regulator will only work with the tools already adopted, as well as monitor the current situation, which, by the way, is a good strategic plan.
The Fed also announced its forecast for the US economy, which predicts that in 2020, unemployment in the US will be at 9.3%. US GDP is also expected to shrink to 6.5% in 2020, instead of the 2% forecast previously.
"Have we already passed the bottom? Maybe. Can we push off from the bottom of unemployment? If you look at the May figures, it's possible. But to be sure, we need more numbers, "Powell said.
Today, the weekly report on the US labor market will be published, which has a forecast of 1,500,000 initial applications and 19,890,000 repeated applications. Although these rates are still very high, the expectations are actually pretty good.
Further development
Analyzing the current trading chart, we can see that the quotes entered a bearish mood during the Asian trading session, going down to the area of yesterday's low at 1.1323. However, market participants were not able to stay at the given level, so a V-shaped recovery was formed. A further upward movement is still uncertain, since pressure on long positions still exists.
Nevertheless, the quotes are expected to continue concentrating in the area of 1.1440 / 1.1500, which will put pressure on speculators and can theoretically lead to a fluctuation at 1.1330 / 1.1410. The trend in the medium-term will only change if the quotes consolidate above 1.1500 in the daily period.
Thus, based on the above information, we present these trading recommendations:
- Open sell positions below 1.1370, towards 1.1330. Next positions will be determined after the quotes consolidate below 1.1300.
- Open buy positions above 1.1415, towards 1.1440.
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that the indicators of technical instruments at hourly and daily periods signal buy due to the concentration of prices at the weekly highs.
Volatility per week / Measurement of volatility: Month; Quarter Year
The measurement of volatility reflects the average daily fluctuation calculated by Month / Quarter / Year.
(June 11 was built taking into account the publication time of the article)
The volatility of the current time is 76 points, which is already high. Nevertheless, activity may still increase if the market reacts to the statistics from the United States.
Key levels
Resistance zones: 1.1440 / 1.1500; 1.1650 *; 1.1720 **; 1.1850 **; 1,2100
Support Areas: 1,1300; 1,1180; 1.1080 **; 1,1000 ***; 1.0850 **; 1.0775 *; 1.0650 (1.0636); 1,0500 ***; 1.0350 **; 1,0000 ***.
* Periodic level
** Range Level
*** Psychological level