From the point of view of complex analysis, you can see the first major change in a long time, but now let's talk about the details.
Last trading week passed according to a given upward movement, during which the quote worked out the average level of 1.2350 at the beginning of the path, and eventually broke through the main level of the flat formation 1.2620 [1.2150 / 1.2350 // 1.2620. Price consolidation above the level of 1.2700 is the first since March of the current year, which was in some sense an expected fluctuation due to a number of factors. So, reaching the 1.2620 border was the fourth, and having the movement was inertial, which gave additional acceleration and confidence to traders. In terms of similar dynamics, it is worth highlighting the correlated trading instrument EUR/USD, which can change the clock component of the flat formation a little earlier, similarly breaking through the upper border.
Is it worth considering the existing change as the beginning of fundamental changes. I think it's too early to draw such strong conclusions, for a start, quotes need to consolidate above the level of 1.2770 in order to most likely exclude a return to the framework of the previous flat formation. But there are difficulties here, radical changes in this case involve a return of the price to the area of the psychological level of 1.3000, where the new amplitude will get the boundaries of 1.2770/1.3000/1.3300. As we can see, we are not talking about a change in the trend, the new range will become an echo of the past, where similar dynamics were pursued in the periods of autumn 2018, winter 2019, Dec-Feb. 2020.
When analyzing Friday's trading in detail, it's worth highlighting a series of fluctuations, and so, the breakdown of the 1.2620 border took place at the start of the European session, where, against the background of inertia, the quote rushed to the level of 1.2688, after which it formed the "breakout pullback" pattern an hour period. The maximum value for the day was the price level of 1.2730 during the American trading session, where a variable resistance was found with a subsequent return to the area of 1.2660.
In terms of volatility, an acceleration relative to the average daily indicator of 11% is recorded, which can be considered normal in terms of overall market dynamics. If we analyze the dynamics of the pound/dollar relative to the whole of the past week, we will see that the average is 125 points, which is comparable in size to the overall average.
As discussed in the previous review, traders considered a scenario of a major change. For this reason, buy positions were considered in the level of 1.2670 area.
Considering the trading chart in general terms, the daily period, you can see the update of the maximums of the upward trend from March 20, where the recovery relative to the downward inertial movement of 03/10/20/03/20 was approximately 78%, and this is already a significant part for judging cardinal changes in market ticks .
The news background on Friday contained a report from the United States Department of Labor, where, to everyone's surprise, the unemployment rate in May declined from 14.7% to 13.3% with a growth forecast of 19.7%. The surprises do not end there, since, based on the report, 2,509,000 new jobs were created in May, which, incidentally, is a new record in the history of US statistics. It is worth recalling that they predicted a reduction in the number of jobs by another 8 870 000, but here everything is the opposite.
The reaction of the US dollar to statistics was naturally in favor of its growth, but when considering the pound/dollar currency pair, we will see an extremely insignificant reaction, where the pound sterling won back almost immediately.
In terms of the general information background, we can single out the next, fourth round of negotiations between England and Brussels on the terms of a trade agreement, which ended with little progress, according to the main negotiator from Britain, David Frost. So, a way out of the impasse may be concessions on the issue of EU duties on some British goods and Prime Minister Boris Johnson is ready to do this in order to get the negotiations off the ground.
However, Michel Barnier, EU chief negotiator from the European Union, says that the current progress on Brexit is minimal.
"I have to tell the truth, and it consists in the fact that there was no significant progress in the negotiations this week," Michel Barnier said at a press conference on Friday.
The EU negotiator also said that he would not agree to an agreement that would damage the integrity of the single market and the EU itself in the long term.
Now, everyone is hoping for a personal meeting of Boris Johnson with representatives of the European Union, which is scheduled for mid-June, perhaps. it will somehow soften the existing negotiations; otherwise, the pound will continue an insurmountable decline again.
Today, in terms of the economic calendar, we have an empty place, thereby the main pressure factors will be technical as well as informational.
Further development
Analyzing the current trading chart, we can see price fluctuations in the variable framework of 1.2660/1.2730, where an attempt to break through the upper boundary has already been recorded on the market, but sellers have gained the upper hand. Now, it's worthwhile to carefully monitor the consolidation points, since there is a lot of versatile information, where, as it were for the pound sterling, there is something to grab for, also extremely positive statistics come out on the US dollar. Do not forget about the level of 1.2770, which will be able to give answers on long operations in case of its passage.
In terms of the emotional component of the market, volatility speaks for itself, the speculative mood is great, as are the indicators that reflect their dynamics.
It can be assumed that price fluctuations within 1.2660/1.2730 values will not last long, where it is possible to work on local operations focusing on the breakdown of established boundaries. At the same time, subsequent consolidation points may show us the way to more significant price changes.
Based on the above information, we derive trading recommendations:
- We consider buying positions above 1.2730, towards 1.2770.
- We consider selling positions below 1.2660, towards 1.2620
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical tools regarding hourly and daily periods signal a purchase, which is confirmed by the points of price consolidating relative to market ticks.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(June 8 was built taking into account the time of publication of the article)
The current time volatility is 61 points, which is still considered a low indicator relative to the average daily dynamics. It can be assumed that the breakdown of variable frames can lead to local acceleration of volatility.
Key levels
Resistance zones: 1.2725 *; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 1.2620; 1.2500; 1.2350 **; 1.2250; 1.2150 **; 1.2000 *** (1.1957); 1.1850; 1.1660; 1.1450 (1.1411); 1.1300; 1.1000; 1.0800; 1.0500; 1.0000.
* Periodic level
** Range Level
*** Psychological level
**** The article is built on the principle of conducting a transaction, with daily adjustment
