The trading week is coming to an end and it's time for us to summarize the preliminary results. We got more than 350 points of the vertical move and the breakout of target levels in such a short period of time as a week, but what has changed and what is worth paying attention to?
First of all, it is worth highlighting the change in the boundaries of the price range from 1.2150 // 1.2350 // 1.2620 to 1.2770 // 1.3000 // 1.3300, where the psychological region of 1.3000 has already fallen under the pressure of buyers, which actually confirmed the range change theory.
The second thing worth paying attention to is the amazing overbought pound sterling, which has risen in value by almost 800 points since the beginning of July. Everyone understands perfectly well that the British currency is not such a promising asset at this time due to the many long-term problems in the economy of the United Kingdom, but it is impossible to hide from the sale of the US dollar, so a rapid upward movement of the pound is recorded, without a proper foundation.
Changing the ranges of price fluctuations is a normal phenomenon, and a return to the previous boundaries 1.2770 // 1.3000 // 1.3300 can help stabilize the emotional mood of the market. The only thing that worries traders is the rate of change in quotes, which may lead not to stabilization of the emotional mood of the market, but to the worsening of speculative excitement. That is, the vertical movement of the price without corrections cannot last forever, the boiling point will come sooner or later, and delaying the process will not lead to a rational corrective move, but to a collapse, similar in speed to a rise.
Analyzing the past day by the minute, you can see that the round of long positions began at 7:30 UTC+00 and lasted until the very end of the daily candle. Due to this move, the quote managed to overcome the boundaries of the psychological level of 1.3000, and the maximum point was the value of 1.3101, which declined already during the Asian session of the new day.
In terms of dynamics, the highest daily activity indicator for a month and a half is recorded - 157 points, which is 41% higher than the average. Such sharp jumps in volatility signal the prevailing speculative interest, which heats up the trading instrument and makes it unstable.
Considering the schedule of trading in general (daily TF), you can see that there is not such a great distance by the conventional upper limit of the range of 1.2770 // 1.3000 // 1.3300, the interaction of trade forces can begin earlier. If we pay attention to the period from January to March 2020, the quote within the values of 1.3200/1.3250 already felt resistance, and with the existing overbought, this slowdown can be perceived as a ceiling, which is worth considering in the work.
The news background of the past day contained an important package of statistical data on the United States, where traders had the first estimate of GDP for the second quarter, which reflected a sharp decline in the economy. On a quarterly basis, a decline of -32.9% was recorded, and by almost -10% in annual terms, this is a huge blow to the US economy, so now the real reason for the sale of the US dollar is clear.
In terms of the information background, as before, there is a discussion of the Brexit divorce process, where the French Foreign Ministry's Secretary of State for European Affairs, Clement Beaune, spoke this time.
"We have a negotiator - Frenchman Michel Barnier - who is negotiating again with the British this week to try and negotiate. But I will say one thing very simply: we will not accept the agreement at any cost, because it is not in the interests of France or Europe," Beaune said.
The EU's tough position on the deal was known to us at the beginning of the year, but this confirms once again the judgment that a miracle should not be expected, a tough exit or an incomplete agreement is possible on the Brexit margins, and this will all strongly affect the British currency in the form of a negative.
Today, in terms of the economic calendar, we have only statistical data for Europe, while for the United States, only indicators on income/expenses will be published, which should not arouse particular interest in the market.
The upcoming trading week is expected to be active in terms of the economic calendar. We will receive not only a large package with macroeconomic statistics for different countries, but also a meeting of the Bank of England, as well as a report from the United States Department of Labor, which will definitely give drive to the market.
Monday August 3rd
UK 8:30 Universal time - Manufacturing PMI (July)
USA 14:00 Universal time - ISM Manufacturing Business Activity Index (PMI) (July)
Tuesday , on August 4
USA 14:00 Universal time - Volume of industrial orders (June)
Wednesday 5 August
UK 8:30 Universal time - Services PMI (July)
USA 12:30 Universal time - ADP report on the level of employment in the private sector (July)
USA 14:00 Universal time - ISM index of business activity in the services sector (July)
Thursday 6 August
6:00 Universal time - Meeting of the Bank of England with a decision on the interest rate, as well as a report on monetary policy
USA 12:30 Universal time - Claims for unemployment benefits
Friday 7 August
USA 12:30 Universal time - report of the US Department of Labor
- Change in the number of people employed in the non-agricultural sector
- Unemployment rate
- Average hourly wages
Further development
By analyzing the current trading chart, the upward movement of the price can be seen during the Pacific and Asian sessions. But with the start of the European session, the quotes took a consolidation position in the range of 1.3115/1.3140. It is obvious that the market is on the verge of an overbought British currency and the speculation bowl can tip over literally at any moment, where there will be a sharp decline instead of growth.
Regarding our actions, it would be most optimal to work on the breakdown of the 1.3115/1.3140 consolidation, which will be broken in the next few hours. In other words, our tactics are aimed at local operations in the direction of breakdown.
Based on the above information, we will display trading recommendations:
- Consider sell deals below the level of 1.3110, towards 1.3070 - 1.3000.
- Consider buy deals above the level of 1.3145, with the prospect of a move to 1.3200 - 1.3250.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on the minute, hourly and daily periods signal a buy, due to price fluctuations within possible highs.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(July 31 was built taking into account the publication time of the article)
The volatility of the current time is 66 points, which is 40% lower than the daily average. A breakdown of the 1.3115/1.3140 consolidation will lead to a surge in activity, which will lead to an increase in volatility.
Key levels
Resistance zones: 1.3200 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 1.3000; 1.2885 *; 1.2770 **; 1.2620; 1.2500; 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