From a comprehensive analysis, we see a control convergence with the minimum of last year, where the quote feels a strong pressure, and now about the details. So, the moment that we've been waiting for so long has come, where the tact of the global trend has come into question (I mean the recovery process relative to the oblong correction). It took almost four and a half months for the price to return to the 1.0879 pivot point, which was tedious. The main recovery process took place from the beginning of January to the present. Here we are in the area of the autumn of last year, where the quote is at least 1.0879, followed by historical ranges (1.0700/1.0850; 1.0500/1.0700; 1.0000//1.0350//1.0500), which put psychological pressure on market participants.
The theory of possible development.
The EURUSD currency pair has been focused on the global downward trend for more than eleven years, where the peak was so high that not all traders who read my articles saw it firsthand. Many attempts were made to change the global tact, but it all came down to the fact that the lows were updated. The current fluctuation, as well as the movement, is no different from history. This judgment follows not only from technical analysis but also from fundamental analysis, which shows the difficult situation with the eurozone economy. So, the fundamentalists refer to the disastrous figures for the industry, which have been in such a hole for 14 months in a row that the light barely penetrates. At the same time, the rhetoric of the European Central Bank is so mired in low rates that it is lost in the results, and the current modernization of monetary policy still has many questions and mysteries, where answers will be received only at the end of 2020.
Based on the above information, we can assume that the existing lows are not as terrible as they are described by many, and the downward course has the right to further development. The new theory will consistently consider the possibility of updating the lows in the medium to long-term perspective.
In terms of volatility, we see an insignificant slowdown relative to the previous day, which may be associated with the risk of a rebound from the low of last year. We still have stable activity indicators, which reflect the healthy interest of market participants.
Analyzing the past day by the minute, we see almost horizontal movement throughout the day, expressed in the boundaries of 1.0905/1.0925. The most noticeable changes occurred in the period of 15:00-16:30 (trading terminal time), where there were punctures of the accumulation boundaries with a local convergence with a minimum of 1.0879 (convergence at a distance of 12 points).
As discussed in the previous review, traders have been working on the downside since the second stage, where the quote is so close to the interaction point of 1.0879 that it already feels a little awkward. Traders make partial and full fixes of previously opened short positions.
Looking at the trading chart in general terms (the daily period), we see that the price is at the breaking point of the base of the oblong correction.
The news background of the last day included in the vacancies (JOLTS) in the United States, where they expected growth to 7.0 million, and received a reduction from 6.80 million to 6.40 million.
In terms of the general information background, we are ready for every taste and the coronavirus has moved to a new level. The head of the Federal Reserve System (FRS) Jerome Powell outlined possible risks for the dollar economy in written testimony to the US Congress.
"Some uncertainty about trade has recently decreased, but risks to the forecast (growth) remain. In particular, we are closely monitoring the appearance of the coronavirus, which can lead to disruptions in China, which will affect the entire global economy," Powell said.
Also, Jerome Powell made it clear that the direction of the regulator was chosen correctly and the Fed does not plan to reduce the rate yet.
"At subsequent meetings, the Federal Open Market Committee of the Federal Reserve left the rate unchanged, given the reduction of some uncertainties around trade and some signs that global growth may stabilize. The committee believes that the current state of monetary policy will support continued economic growth, a strong labor market and a return of inflation to the committee's symmetrical goal of 2%," the Fed chief said.
Such statements by Powell immediately found criticism from Donald Trump, who revealed the chronology of the Fed's speech to Congress and the fall in stock indexes, referring to the reluctance to further reduce the interest rate.
"When Jerome Powell started his speech, the Dow grew by 125 (points) and continued to rise. As the speech progressed, the index steadily declined and lost 15 points. Germany and other countries receive money at low rates. We are a more attractive country, but the Fed rate is too high, the dollar strongly affects exports," @realDonaldTrump wrote on twitter.
The background does not end there, as new comments have appeared on the upcoming negotiations between England and Brussels regarding trade conditions. So, the Head of the European Commission (EC) Ursula von der Leyen urges Prime Minister Boris Johnson to think big in the upcoming negotiations.
"We are ready to discuss various models of trade agreements. But such agreement would entail both rights and obligations for both parties", said the head of the EC.
At the same time, the EU's chief negotiator, Michel Barnier, noted that the EU does not plan to give Britain an unlimited and permanent equivalence regime in the financial services sector.
"There will be no general, indefinite and unlimited equivalence regime in the financial services sector. We will retain the freedom of action to make our own decisions," Barnier said.
Today, in terms of the economic calendar, we had data on industrial production in the EU, where the decline deepened from -1.7% to -4.1%, this is the 14th month in a row. The market's reaction to the negative data has not yet followed, possibly because there is a characteristic pressure from a closely located minimum.
Further development
Analyzing the current trading chart, we see a strong stagnation, the value of which already exceeds 40 hours. This is a reflection of a kind of pressure from the minimum of the oblong correction of 1.0879, where many are insured and partially/completely exit trading positions in case of a rebound. At the same time, a large part of traders are sure that the breakdown of this coordinate is possible, as well as the descent of the price below, but everything needs its own time.
Detailing the available time interval per minute, we have the accumulation limits of 1.0900(-10p) - 1.0925, where no sharp changes have been recorded yet.
In terms of the emotional mood of market participants, we see signs of caution, while speculators are on a low start.
In turn, traders have moved to partial and full fixation of short positions, where trading forces are regrouped with possible re-opening of transactions.
It is likely to assume that the pressure from the low of 1.0879 will not last as long as many people think, and we will see new jumps soon. As you have already understood from our article, we consider the main prospect in terms of medium to long-term decline, but this conversation will come after fixing the price below 1.0879-1.0850. Now spontaneous jumps are not excluded, including rollbacks, where you can safely work on breaking the boundaries of the current accumulation of 1.0900 (-10p) - 1.0925.
Based on the above information, we will output trading recommendations:
- Buy positions will be considered if the price is fixed higher than 1.0925, local positions.
- Positions for sale are left for fixing. Further short positions will be considered after the price is fixed below 1.0879-1.0850. Local positions (speculative) are considered from 1.0900 to 1.0880-1.0850.
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that the indicators of technical instruments are focused on the downward course having a sell signal. At the same time, the accumulation can affect the indicators of minute and hour intervals, having a multidirectional signal.
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.
(February 12 was based on the time of publication of the article)
The current time volatility is 23 points, which is of low value in terms of the pair's dynamics. It is likely to assume that if there is no accumulation breakdown, then volatility will remain low. It is worth considering that even if the above-described theory coincides, volatility will tend to the golden mean (the average indicator), which will reflect a healthy market cycle.
Key levels
Resistance zones: 1.0900/1.0950**;1.1000***; 1.1080**; 1.1180; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.
Support zones: 1.0879*; 1.0850**; 1.0500***; 1.0350**; 1.0000***.
* Periodic level
** Range level
*** Psychological level
***** The article is based on the principle of conducting a transaction, with daily adjustments.
