From the side of complex analysis, we can see the fixation of short positions, on the basis of which a local surge of activity arose. Now, let's talk about the details.
The past trading day was on the wave of speculative operations, where the quote failed to consolidate lower than 1.2250, and therefore, there was a fixation of short positions, which led to a local surge of the pound sterling in the direction of 1.2350/1.2400, fulfilling the alternative scenario of market development set by us in the previous review.
The descending clock from the range level of 1.2770 has a step structure [time period H4], which indicates a firm intention to return the quote to its original position. Holding the set move, it is quite possible to bring the quote to the area of 1.2000/1.2150, but it will not end there, because if short positions are not subject to severe overheating due to a step-by-step move, then traders will have a chance to update the historical lows.
When considering the theory of development of trends, we should not forget that the market, as before, has a high speculative interest, where the most profitable tactics are local operations, on the basis of which you will be on the pulse of the market.
Analyzing the past trading day in detail, you can see that a round of long positions arose at the start of the American session, where the pound sterling gained more than 120 points in just a few hours. This phenomenon was local in nature, after which the quote went into the stagnation stage.
In terms of volatility, an acceleration of 15% is recorded relative to the average daily indicator, which confirms the fact of speculative activity.
Analyzing the dynamics of volatility in June, you can see that the average daily indicator is 127 points, and this is the second largest indicator since the beginning of the year.
JUNE : Monday - 183 points; Tuesday - 97 points; Wednesday –69 points; Thursday - 132 points; Friday - 148 points; Monday - 107 points; Tuesday - 136 points; Wednesday - 106 points; Thursday - 168 points; Friday - 179 points; Monday - 149 points; Tuesday - 134 points; Wednesday - 76 points; Thursday - 164 points; Friday - 113 points; Monday - 141 points; Tuesday - 100 points; Wednesday - 128 points; Thursday - 75 points; Friday - 123 points; Monday - 137 points; Tuesday - 141 points.
As discussed in the previous review, traders viewed short positions as the main ones, but only if the price consolidates below 1.2250, which did not happen.
The recommendation from Tuesday regarding an alternative development scenario coincided 100%, having an increase in the trade deposit.
[We consider buy deals as alternative positions in the case of deceleration relative to the coordinates and price consolidation above 1.2315. The prospect in this case is directed towards the values of 1.2350-1.2385.]
Considering the trading chart in general terms (the daily period), we can see a 77% recovery relative to the inertia of May 18, which indicates the stability of a given tact from a range level of 1.2770.
The news background of the past day contained the final data on UK GDP for the first quarter, where the decline rate was -1.7% instead of the forecast of -1.6%, which worsened the position of the pound in the morning.
In terms of the general information background, we have a loud speech by Prime Minister Boris Johnson, who is trying with all his might to boost the economy of the United Kingdom, but so far only in words. So Johnson promised to take the economy out of the crisis caused by the coronavirus by accelerating the monitoring of investments in infrastructure and reducing the rules for planning real estate.
"We cannot continue to be just captives of the crisis. We must work quickly because we have already seen a dizzying drop in GDP, and we know that people are now worried about their work and their business. We will build hospitals, build schools, colleges, but we will also restore the environment and create a more beautiful UK, "said the Prime Minister.
For these ambitious plans, Boris Johnson promised to allocate a total of 5 billion pounds.
Regarding the divorce proceedings, Brexit has introduced new deadlines for concluding a trade agreement with the European Union. During a personal meeting between the two negotiators Michel Barnier and David Frost, the deadlines for concluding the deal were set already in September; however, it is worth recalling that previously, we were talking about July, and if we refer to a lot of comments from high-ranking EU members, there are no constructive proposals.
Today, in terms of the economic calendar, we have the index of business activity in the manufacturing sector of Britain in June, where growth is expected from 40.7 to 50.1, which can locally hold the English currency. In the afternoon, we are expected by the main event, the ADP report on the level of employment in the United States, where growth of 3,000,000 was forecasted, which will be the largest growth in 20 years. If the data are confirmed, then the US dollar will receive impressive support.
Further development
Analyzing the current trading chart, you can see the price fluctuation within the range of 1.2350/1.2400, which indicates a temporary hold on the price on the impulse of the past day. Most likely, this is a temporary phenomenon, since many factors indicate a further decline.
In terms of the emotional mood of the market, there is a high coefficient of speculative operations, which will lead to increased volatility.
It can be assumed that if the price consolidates below the level of 1.2350, the quote will go towards the variable pivot point 1.2250, where in the event of a breakdown of this value, we should expect a move to the lower border of the range 1.2150 // 1.2350 // 1.2620.
The local strengthening of the pound in the first half against the background of the news flow is not ruled out.
Based on the above information, we derive trading recommendations:
- Consider sell deals lower than 1.2350, with the prospect of a move towards 1.2250 - 1.2150.
- Consider buy deals as local operations higher than 1.2405 towards 1.2430.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the performance of technical tools relative to minute and hour periods signal a purchase due to a local surge of long positions. The daily period stores a sell signal due to a downward bar.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(July 1 was built taking into account the time of publication of the article)
The volatility of the current time is 42 points, which is 65% lower than the daily average. It can be assumed that against the background of the news flow and speculative activity, volatility will increase by the end of the day.
Key levels
Resistance zones: 1.2350 **; 1.2500; 1.2620; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support zones: 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
