The rise above the level of 1.1440 yesterday was perceived by market participants as a sign to enter the market. Because of it, a sharp reduction in the volume of long positions occurred, which led to a slowdown, during which the bears took advantage of the situation and triggered a rollback in the market.
At the moment, it is not clear whether the movement will turn into a new round of downward development. But what can be certain is that the bears were seriously scared by the consolidation of quotes above 1.1440. This is because the yearly high 1.1500 is located at a distance of 60 points, and its breakdown would mean a possible fracture in the medium-term downward trend, which will be a major change in the market.
Thus, do not rush to conclusions since the market is very much prone to unstable moods caused by external news. Based on this, local operations focused on impulses are most suitable in the current market.
Analyzing the past trading day in detail, we can see that a surge in speculation with buy positions was noticed at the period 08: 15-09: 00 (UTC + 1), during which the quote went above the level of 1.1440. After that, there was a consolidation which lasted for five hours, expressed as a deceleration along the area of 1.1440, during which short positions arose from 14:30 that were picked up by speculators.
Thus, volatility accelerated in the minute intervals, since in the analysis of daily activity there is an indicator slightly lower than the average norm.
Analyzing the trading chart in general terms (daily period), we can see that the global downward trend is simply not possible to be broken at the moment, at which a breakout from the 1.1500 level will lead to a 45% price recovery relative to the medium-term trend, which will automatically call it into question.
Meanwhile, the news published yesterday included the data on industrial production in the United States, where the pace of decline slowed from -15.36% to -10.82%, although they predicted an even more optimistic indicator (-6.2%). Nevertheless, it is enough to set a movement in the US dollar, since the volume of industrial production in monthly terms increased by 5.6% in June.
At the same time, the Fed also published its so-called "Beige Book" yesterday, which examines the current situation of the economy of the United States. Based on the document, business activity increased almost throughout the country, but it still remains below the level observed before the coronavirus pandemic.
Today, the European Central Bank is scheduled to have a meeting, during which interest rates are not expected to be changed, but market participants still hope to receive new information on the prospects of monetary policy in the Eurozone.
The event does not threaten to put pressure on the market, but if during the press conference ECB President Christine Lagarde announces changes in monetary policy or forecasts of economic recovery / slowdown, volatility will increase significantly.
Meanwhile, in the afternoon, the weekly report on the state of employment in the United States will be published, at which a decrease from 1,314,000 to 1,290,000 initial applications is expected. As for repeated applications, a decrease from 18,062,000 to 17,700,000 is forecasted. The recovery of the labor market is slow, but it is still transpiring, which supports the US dollar.
[UTC + 1]
12:45 - ECB meeting
13:30 - ECB press conference
13:30 - applications for unemployment benefits in the United States
Further development
Analyzing the current trading chart, we can see that the quote underwent a rollback, in which not even a small amount of short positions was concentrated. This indicates that the chance of a more significant recovery from the downward movement is still possible in the market, which may lead to a sideways movement. In addition, a repeat of the scenario last March 9-23 may not happen, mainly because many factors are absent. Instead, a gradual downward course with concentration in variable ranges is more possible.
As for market sentiment, the speculative mood of investors are at high levels, which may affect volatility.
Thus, it is assumed that in the case of a bearish mood and consolidation in the range 1.1390-1.1380, short positions will continue to push the euro towards the levels 1.1350-1.1300. In addition, the upcoming conference of the ECB is an unpredictable phenomenon, since anything can be said there.
Meanwhile, an alternative scenario will occur, if the quote consolidate higher than 1.1440-1.1450.
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that indicators of technical instruments in the hourly and daily periods still signal "buy" due to the concentration of prices in the immediate vicinity of the highs. Minute intervals, on the other hand, are already in a rollback phase.
Volatility per week / Measurement of volatility: Month; Quarter; Year
The measurement of volatility reflects the average daily fluctuation calculated by Month / Quarter / Year.
(July 16 was built, taking into account the time the article is published)
The volatility at this current time is 32 points, which is 58% lower than the daily average. It is assumed that due to the news and movement towards the important price area, another speculation may arise, which will lead to an increase in volatility.
Key levels
Resistance Zones: 1.1440 / 1.1500; 1.1650 *; 1.1720 **; 1.1850 **; 1,2100
Support Areas: 1.1350; 1.1250 *; 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
Also check the hot forecast and trading recommendation for the GBP/USD pair here, or the analysis and trading recommendations for both the EUR/USD and GBP/USD pairs here.
