The past trading week ended with a sharp slowdown in terms of dynamics, which we have not seen for quite a long time, but there is an explanation for everything. The decline in trading volumes that arose due to the lack of a key player in the market - the United States, which had a holiday last Friday to celebrate Independence Day.
Volatility declined to around 48 points for the first time in 28 trading days, which is 60% below the daily average. All speculators have noticed this phenomenon without exception, where excessive trading forces will lead to a surge in market activity in the near future.
In terms of statistics for last Friday, we have the final business activity index in the United Kingdom, where the sector recorded growth from 29.0 points to 47.1, and the composite PMI index rose from 30.0 to 47.7.
The reaction to the indicators was practically absent on the market, the quote both stood still and continued to stand, due to the same reason - the lack of trading volumes, as described above.
In terms of informational background, noise is still developing based on the Brexit divorce process. So, everyone actively discussed last week the early termination negotiations between England and Brussels due to the lack of consensus on a number of important issues. Now, we have received the comment of the head of the European Commission, Ursula von der Leyen, who expressed the desire to work on a trade agreement, but noted that the European Union is not ready to reach a deal at any cost. In fact, this suggests that the EU is not ready to compromise with Britain once again, which will provoke another round of market emotions at the next negotiation session.
Today, in terms of macroeconomic data, we have the index of business activity in the UK construction sector in June, where they expect an impressive growth from 28.9 to 47.0, which locally can support the pound temporarily. We expect the ISM index of business activity in the services sector for July in the United States in the afternoon, where they forecast growth from 45.4 to 49.5. Let me remind you that the ISM index is an important indicator of the state of the service sector in the US economy.
United Kingdom 8:30 Universal time - The index of business activity in the construction sector for June
USA 14:00 Universal time - ISM index of business activity in the services sector for July
From the point of view of a comprehensive analysis, we see the reverse movement of the quote relative to the Friday stagnation, where the quote closely approached the periodic level of 1.2500 and locally slowed down the movement. The chance of a price rebound is great, but the main trading tactic will be the method of breaking one of the boundaries of the formation of 1.2437/1.2530.
The burning forecast is that trading volumes will return to their original position, where the stagnation of the past day can play the role of a catalyst for the trading forces that speculators will use. The trade formation 1.2437/1.2530 is taken in the work, working on the breakdown of one or another border. As a result, you get not just a local surge, but also a chance to get into the local inertial price movement.
Based on the above information, we derive trading recommendations:
- Consider buy deals in case of price consolidating higher than 1.2550, with the prospect of a move to the level of 1.2620. Local position 1.2505 ---> 1.2530.
- Consider sale deals below the level of 1.2435, with the prospect of a move to 1.2350. Local position 1.2485 ---> 1.2445
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments relative to the minute, hour and day periods signal a purchase, for the concentration of the price within the level of 1.2500.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Volatility measurement reflects the average daily fluctuation calculated for the Month / Quarter / Year.
(July 6 was built taking into account the time of publication of the article)
The current time volatility is 39 points, which is 67% lower than the daily average. It can be assumed that the restoration of dynamics can occur even without impressive bursts from the information and news background.
Key levels
Resistance Zones: 1.2500; 1.2550 *; 1.2620; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Zones: 1.2350 **; 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