From a comprehensive analysis, we see an unchanged picture. The quote makes fluctuations along with the level of 1.2770, increasing the interest of market participants. Now, about the details. For the third day, the quote has been tirelessly wavering within the control level of 1.2770, where there seems to be a background. Emotions are off the scale, however, there are no drastic changes in the pound. This is a very interesting phenomenon, and if we compare the behavior of the pound with its close counterpart in the EURUSD market, we will see that the dynamics are radically different. Let's start with the fact that the correlation between pairs has long been positive, however, now it is negative the dynamics in the synchronous analysis are significantly lower. It turns out that the background that pushes the euro bypasses the pound and the downward pressure of the English currency keeps the quote from correcting, having a flat with variable borders as a result.
Regarding the theory of top-down development, we have confirmation of the sellers, as well as their intentions for further development. The only stumbling block remains the level of 1.2770 with its amplitude limits, which deters sellers from further decline. If we compare the euro/dollar pair, where there was a similar theory of downward development, the external background did not disrupt the overall cycle in any way.
In terms of volatility, we see that the movement in the conditional flat did not affect the dynamics, which still shows acceleration, exceeding the daily average by 6%.
Volatility details: Tuesday-103 points; Wednesday-115 points; Thursday-86 points; Friday-193 points; Monday-110 points; Tuesday-102 points. The average daily indicator relative to the volatility dynamics is 96 points (see the volatility table at the end of the article).
Detailing the past day by the minute, we see that the movement was mostly upward but within the framework of the flat oscillation. The most notable impulses occurred from 17:00, where there was a strong news background.
As discussed in the previous review, intraday traders do not rush into short positions due to the risk of a reverse move and fluctuations within the range of 1.2770//1.2885//1.3000. Therefore, the tactic was chosen as a wait-and-see approach with an analysis of the fixing points relative to the February 28 minimum (1.2725).
Looking at the trading chart in general terms (the daily period), we see that the downward move we are in has been held on the market for more than ten weeks, and this is the longest anti-movement in the structure of the medium-term upward trend. It turns out that the theory of downward development has a chance to soon move to the phase of full recovery.
The news background of the previous day included data on the index of business activity in the construction sector in Britain, which recorded an increase from 48.4 to 52.6 with a forecast of 48.8. The market reaction to such positive data was in favor of the pound but the rate growth was local.
The main event was an emergency meeting of the Federal Reserve System (FRS), during which the interest rate was cut by 0.5% unscheduled, which put the strongest pressure on financial markets. The main arguments for lowering the rate for the Federal Reserve were the possible risks of the impact of the coronavirus on the country's economy.
Such important news almost immediately played on the market in terms of local weakening of the US dollar. A kind of agreement between the US government and the Fed is strongly overlooked. For example, if we look at EURUSD, we will see that the pair grew in price in advance. However, at the time of publication, there was a surge of not so large scales, as if this step was already taken into account in the quote, and someone made a good profit on it.
In fact, the Fed's move will play heavily on the decisions of the Bank of England and the ECB, which will be forced to follow the locomotive in terms of rate cuts.
For his part, outgoing Bank of England Governor Mark Carney said that there is a line of communication between central banks around the world. Moreover, politicians are working on a strong and timely response to the economic blow from the coronavirus, which has raised fears of a new global recession.
Today, in terms of the economic calendar, we have the ADP report for employment in the United States, which expects a decrease in the number of people employed in the non-agricultural sector from 291 thousand to 170 thousand. At the same time, the noise reduction rate and possible retaliatory actions by central banks scare many investors.
Further development
Analyzing the current trading chart, we see a quote returning to the level of 1.2770, which means that there have been no major changes in the market. All movement is within the conditional limits of the oscillation. With all the information provided above in the arsenal, confidence in the further depreciation of the pound and the development of the recovery theory is growing every day. If this is not enough, then an insider report came out less than an hour ago that the Bank of England, like the Fed, may hold an emergency meeting during which the interest rate will be lowered. Just do not panic unnecessarily and do not make deliberate manipulations, since we are interested in the main course and not local jumps.
From the point of view of emotional mood, we see how a dense information background focuses on increased interest, which leads to high activity and speculative outbursts.
Detailing the minute-by-minute time interval, we see that when the price approaches the level of 1.2770, local jumps in the opposite direction occurred but within the established flat.
In turn, intraday traders are waiting for an exit from the existing fluctuation, where the main goal is to develop downward positions. Medium-term traders are already in short positions but they are also waiting for a new stage, as it will bring new profits, as well as a top-up in the position.
Having a general picture of actions, we see that the quote is moving along the level of 1.2770, where the conditional boundaries are the values of 1.2740/1.2850. The main plans are at the time of fixing the price below the February 28 minimum of 1.2725, but in this case, we are waiting for a conditional push from the information background, which will be expressed as inertia.
Based on the above information, we will output trading recommendations:
- Local buy positions are already higher than 1.2850 if the price is fixed.
- Sell positions are considered if the price is fixed below 1.2725. Please note that you need the appropriate background, as well as inertia, to stay in this direction, otherwise there may be stagnation, as it was before.
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that the indicators of technical instruments have almost a unanimous signal to sell due to a strong downward background. At the same time, due to the flat indicator, the indicators for the minute and hour periods are variable.
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.
(March 4 was based on the time of publication of the article)
The volatility of the current time is 60 points, which is the average for this section of time. It is likely to assume that the background, emotions, and noise can lead to acceleration, which in principle has been maintained for the past few days.
Key levels
Resistance zones: 1.2885*; 1.3000; 1.3170**; 1.3300**; 1.3600; 1.3850; 1.4000***; 1.4350**.
Support zones: 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.
