From the point of view of complex analysis, we see a violation of the boundaries of a variable flat, and now let's talk about the details. A variable flat of 1.0815 // 1.0850 // 1.0885 lasted about 90 hours on the market, where the quote was consistently focused on the selected coordinates, but the lower border of 1.0815 still could not resist over the past day. In fact, a local breakdown was recorded, where the quote managed to go down to the level of 1.0803, after which there was a slowdown. We expected more from the breakdown of the flat, but what we have, we have, here the main thing is different. Here, the flat has lost the lower support, which has been focused for a long time, and this is the main thing in this case. It turns out that if the border of 1.0815 has lost its rigidity, then its price will pass easily and naturally, and this means that the main goal in the face of the area of interaction of the trading forces of 1.0775 will still be reached. [This reasoning is based on the dynamics of the past day]
Regarding the theory of further development, the drum roll is already approaching, since sequential compression will soon reach a victorious end, and this is confirmed by the instability of the structure. So, if we consider the downward development, that is, towards the main trend, the compression model must initially break through the support of 1.0775, which will give the market a holistic movement, and most importantly acceleration. In order for the compression model to be developed 100%, in this case a breakdown of the base of 1.0636 is needed, and just for its breakdown acceleration and consolidation of the price lower than 1.0775 are necessary.
Looking at the past trading day in detail, you can see the main surge in activity occurred during the start of the American trading session, where an impressive round of short positions appeared, which led the quote to a local breakdown of the lower border of the variable flat.
In terms of volatility, we can not say that we recorded an acceleration, since the overall activity for the day was reduced by 10%, but this is insignificant, and if we analyze the dynamics from the beginning of the trading week, the increase is obvious.
Details of volatility: Monday - 155 points; Tuesday - 183 points; Wednesday - 115 points; Thursday - 278 points; Friday - 166 points; Monday - 151 points; Tuesday - 234 points; Wednesday - 243 points; Thursday - 326 points; Friday - 194 points; Monday - 191 points; Tuesday - 160 points; Wednesday - 133 points; Thursday - 188 points; Friday - 194 points; Monday - 134 points; Tuesday - 127 points; Wednesday - 136 points; Thursday - 147 points; Friday - 91 points; Monday - 67 points; Tuesday - 142 points; Wednesday - 72 points; Thursday - 110 points; Friday - 33 points; Monday - 74 points; Tuesday - 84 points; Wednesday - 134 points; Thursday - 95 points; Friday - 80 pips; Monday - 55 points; Tuesday - 64 points; Wednesday - 82 points. Daily average
As discussed in the previous review, development was carried out relative to the range of 1.0815 / 1.0885, where both local and main positions were concentrated.
Regarding the trading recommendation from Wednesday, we see a partial execution of short positions, where the conditions for local deals are 100% fulfilled, but the process is still ongoing for the main ones.
[We consider selling positions lower than 1.0810, with the prospect of a move to 1.0775, which will relate to the main positions. We consider local transactions in terms of movement from 1.0840 to 1.0815 ].
Considering the trading chart in general terms, a consistent amplitude of inertial fluctuations is visible in the daily period, but all these amplitudes are in a global downward trend.
The news background of the past day did not have statistics for Europe and the United States
In terms of the general informational background, we see how the European economy is not going through the best of times, and the flourishing COVID-19 virus has aggravated the already shaky construction on which everything rested. So, the head of the European Central Bank [ECB] Christine Lagarde, in a written response to members of the EU parliament, recalled that the regulator still has maneuvers for action and he can go far in helping the eurozone-affected countries.
Lagarde also emphasized that buying debts directly from EU countries is contrary to legal requirements and a sound budget policy should be pursued.
"It is clear that contracts mean that the acquisition of public debt in the primary market, that is, direct financing of governments, would undermine the ability to promote such a disciplined budget policy," the EU MPs stated.
At the same time, ECB member Olli Rehn called for broader pan-European cooperation, and governments to take measures to support the economy in a pandemic.
"The difficulties caused by the virus are not related to the reckless financial management of any one country. Therefore, it is necessary to support the most affected countries." said Olli Rehn during a press conference.
In turn, experts from Goldman Sachs, considering medium-term positions on the dollar, said that the current growth of the us currency is associated with uncertainties in the markets, and aggressive measures of the regulator in terms of supporting the economy will lead to an excess of the Fed's balance sheet, and after the end of the coronavirus crisis, investors will begin to flee from the dollar.
Today, in terms of the economic calendar, preliminary data have already been released on the business activity index in Europe, where the service sector recorded a decrease from 26.4 to 11.7 with a forecast of 23.8, while the industrial indicator drops from 44.5 to 33.6 with a forecast 39.2. In turn, the Markit composite business activity index (PMI) is dropping from 29.7 to 13.5, which means that the consequences of restrictive measures to contain the COVI-19 virus were not long in coming.
In the afternoon, a similar index will be published, but for the United States, where you should not expect anything good, and weekly data will be released on applications for unemployment benefits, where the volume of initial applications should be 4,545,000, and the number of repeated ones may be 13,000,000 .
Do not also forget the words of Goldman Sachs. Associated with market uncertainties, investors are poured locally into dollars. Thus, it is clear why fundamental analysis does not always work.
Further development
Analyzing the current trading chart, we see the behavior of the quote, described at the beginning of the article, regarding the fact that the lower border of a variable flat already does not represent a support, and the price can easily move. In fact, market participants have already reached the area of interaction of trade forces 1.0775, which means that the fracture of the compression model is not far off.
In order for a drastic change to happen in the existing model, the quote needs to break the level of 1.0775 and consolidate lower than 1.0750, in this case the chance of holding a downward mood will be higher and we will be able to continue development towards 1.0700-1.0636.
Analyzing the time interval that we have, we can see that the influx of trading forces came at the start of the European session, and the reaction to the negative statistical data of Europe was not long in coming.
In terms of the emotional component of the market, we see not only a large number of speculative positions, but also the activation of conservative traders who are waiting for the breakdown level of 1.0775.
It can be assumed that the quote will still feel a support expressed in the area of interaction between the trading forces of 1.0775, but we should carefully analyze the behavior of market participants, as this is the best time for trading. In this development, we will be guided by both main transactions and local ones, that is, working on a breakdown level of 1.0775, as well as on a local rebound.
Based on the above information, we derive trading recommendations:
- We consider selling positions lower than 1.0750, while maintaining the mood. The prospect of a movement to 1.0700-1.0636.
- We consider buying positions in terms of local operations higher than 1.0805, in the direction of 1.0815-1.0825.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that indicators of technical tools continue to signal a single downward interest.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Volatility measurement reflects the average daily fluctuation calculated for the Month / Quarter / Year.
(April 23 was built taking into account the time of publication of the article)
The volatility of the current time is 50 points, which is 45% lower than the daily average. It is worth considering that with a breakdown of the level of 1.0775, activity can locally increase, which will give us acceleration.
Key levels
Resistance zones: 1.0850 **; 1.1000 ***; 1.1080 **; 1,1180; 1.1300; 1.1440; 1.1550; 1.1650 *; 1.1720 **; 1.1850 **; 1.2100
Support Areas: 1.0775 *; 1.0650 (1.0636); 1.0500 ***; 1.0350 **; 1.0000 ***.
* Periodic level
** Range Level
*** Psychological level
