Using complex analysis, we can see that after the pullback caused by the local oversold, the downward interest resumed, returning us not just to the limits of the variable support point of 1.3055, but fixing below it. In fact, the previously set downward trend is maintained, and the forecast of price convergence with the psychological level of 1.3000 has become a real development in the market. One of the most interesting arguments was the confirmation of the Zigzag-shaped model phases, where, due to recalculation, it was revealed that phase 3 [correction] is not yet on the market. It is under construction, and you can find this analysis here. With the current data, we can assume that phase three of the Zigzag-shaped model is directed towards the psychological level of 1.3000, where it will wait for a stop at the end of the phase. This structure will confirm an even stronger market slowdown that has been occurring since the beginning of the year, which in theory, could lead to an acceleration. There is a wide discussion among experienced traders about the structure of the Zigzag-shaped model, and there are suggestions that its completion may lead to a given stage of recovery of the downward trend.
In terms of volatility, we see a slowdown, about 44% relative to Friday and 30% relative to the average daily indicator. It is worth considering that even though we have a slowdown, a kind of inertia persists in the market, which is a good sign.
As discussed in the previous review, speculators were in the phase of regrouping trading forces at the time of the pullback, where partial and complete fixing of previously available short positions were made. Subsequent bays of short positions were made after the breakdown of the periodic value of 1.3055.
Looking at the trading chart in general terms [the daily period], we see the development of the quote at the top of the medium-term upward movement, where there were no major changes, but a slowdown is present.
The news background of the previous day included data on approved mortgages in Britain. They expected a reduction from 43.7 thousand to 42.5 thousand, but received an increase instead. The previous data was revised for the better, from 43.71 thousand to 44.05 thousand, and the actual ones came out with a solid increase to 46.81 thousand. After that, we had data on new home sales the United States, where we recorded a more significant reduction from 697 thousand to 694 thousand.
The market reaction to the statistics was initially in favor of the pound, where after which, the main inertia resumed its course.
In terms of the general information background, EU's chief negotiator, Michel Barnier, commented on the process of Britain's exit from the European Union, during the joint press conference with Irish Prime Minister Leo Varadkar. Barnier is skeptical about such a short transition period [11 months], and believed that there may not be enough time. Also, the chief negotiator from EU does not clearly understand yet all the steps of England and what they are ready to do to maintain a strong partnership.
"It is not clear to me whether the UK, leaving the EU and its single market, will also decide to abandon the European social and regulatory model. This is a key question, and we are waiting for an answer. Because this response will be the key to our future relationship, " said Michel Barnier.
In turn, the Johnson Cabinet appointed David Frost to lead the team in negotiations with Brussels, during which, the parties will have to discuss issues of future relations.
Today, in terms of the economic calendar, we have data on orders for durable goods in the United States, where the volume of which should grow by 0.6%. Data on house prices will also be published [S&P / CaseShiller], where, according to expectations, there may be an acceleration from 2.2% to 2.6%. At first glance, the data is very good and can go into the piggy bank of the general strengthening of the dollar.
Further development
Analyzing the current trading chart, we can see a rather intense downward movement, where the quote has literally reached the psychological level of 1.3000. In fact, we see local acceleration, but whether it will be enough to break the control level is the big question. We should not forget that the level of 1.3000, which we often talk about, is an extremely important value in the market, as due to the regularity, stops often occur there. At the same time, this level has the walking property, as it displays the range level. The lower limit of walking is in the area of 1.2960. Take this into account when analyzing.
In terms of the emotional mood of the market, we can see a high coefficient of speculative positions, which is confirmed by impulse candles.
Detailing the minute-by-minute period of time, we can see that with the start of the European session, the inactivity has turned into a massive downward movement, which is still maintained in the market at the current hour.
In turn, speculators are actively working downwards, where soon, there will be a massive fixing of trade deals.
Having a general picture of actions, it is possible to assume that this kind of movement overheats the short positions, and the psychological level of 1.3000 can perfectly play the role of support for stopping them. Should we expect further declines? Yes, but you need to be very careful on your actions, as there are repeatedly observed strong interaction of prices near the psychological level.
Based on the above information, we have these trading recommendations:
- Consider buy positions if there is a stop within the psychological level of 1.3000, and a local rebound. It is worth waiting a bit and moving to a smaller time period for a thorough analysis of the behavior of the quotes.
- Sell positions are already available and are being considered for closing. Further deals will be considered after a clear price fix below 1.2960, without the shadow of a candle piercing.
Indicator analysis
Analyzing the different sectors of timeframes (TF), we can see that due to the strong downward movement, the indicators relative to all the main time sections have taken a sell position.
Volatility for the week / Volatility measurement: Month; Quarter; Year
The volatility measurement reflects the average daily fluctuation, based on the calculation for the Month / Quarter / Year.
(January 28 was based on the time of publication of the article)
The current volatility is 58 points, which is already an acceptable norm for the status of an active market. If the support is found within the psychological level of 1.3000, the volatility may decrease at times, and have the boundaries of the average daily indicator as a result.
Key level:
Resistance zones: 1,3180**; 1,3300**; 1,3600; 1,3850; 1,4000***; 1,4350**.
Support areas: 1,3000; 1,2885*; 1,2770**; 1,2700*; 1,2620; 1,2580*; 1,2500**; 1,2350**; 1,2205(+/- 10p.)*; 1,2150**; 1,2000***; 1,1700; 1,1475**.
* Periodic level
** Range level
***Psychological level
**** The article is based on the principle of conducting a transaction, with daily adjustments.
