Over the past trading day, the pound / dollar currency pair showed a high volatility of 133 points, resulting in a partial recovery process. From the point of view of technical analysis, we see that after a staggering jump of 500 points [October 10–11], a so-called technical correction was formed towards the nearest cluster from the range of 1.2500 and Fibo level of 38.2, where the pivot point was found again. In fact, we see a rather interesting process, which is based on the emotions and expectations of a successful end of the divorce process, and the current development of the cluster [1,2500 and Fibo] is the very emotions, since the restoration would have been saved further in a healthy market. Analyzing the past hourly hour, we see that from the beginning of the auction until 11:00 [UTC+00 time on the trading terminal] there was a healthy recovery of the market, in fact without any sharp jerks, but already in the period 11:00 – 14:00 UTC+00, emotional jumps began to occur, against the background of unjustified expectations, which we will talk about later.
As discussed in the previous review, not all traders decided to sit on the fence [off the market], some still decided to ride on recovery, which in principle was not such a bad idea. The recovery theory of 35% -50% relative to the past jump was confirmed once again, and the quotation just came to the cluster area [1,2500 and Fibo]. Even if entering short positions was not from the beginning of the recovery course, but, for example, below the level of 1.2620, you could still pick up a good profit from the market of 50-70 points. For speculators, this is an excellent indicator of the day.
Considering the trading chart in general terms [the daily period], it is not so simple as we would like. So the past emotional leap threw the quotation so much that traders which are frightened began to discuss a trend change, in case the price was fixed higher than 1.2770. From the point of view of technical analysis, the logic of thinking is clear, in terms of a trend change in case of overcoming the second-order correction [1.2770 - 06/25/19], but if the market actions carried an unjustified emotional attitude, then the local growth was temporary, without change of the main trend.
The news background of the past day did not have statistics on the UK and the United States, which cannot be said about a stable information background.
Thus, yesterday, the 65th throne speech of Elizabeth II took place, where Her Majesty stated that the government will change the migration legislation, reform the Criminal Code, education and social assistance to the population, and also confirmed that the country will leave the EU on October 31.
"My government intends to withdraw the country from the European Union on October 31 and work on a new partnership with the European Union, which will be based on the principles of free trade and mutually beneficial cooperation," said Elizabeth II.
The statement of Her Majesty the Queen, unconditionally inspires the public, and perhaps, this led to an emotional return to the market of buyers, locally tossing the pound sterling. It's only worthwhile to understand that the current government's written text for the monarch cannot somehow change the situation in the world and simplify Britain's exit from the EU on October 31, thus it has an emotional background.
In turn, British Prime Minister Boris Johnson does not plan to resign, even if the parliament votes against the provisions of the throne speech of the Queen, an official representative of the Prime Minister's Office said.
This is not an emotional - informational background, and so there was a response from the Minister for Foreign Affairs of Ireland, Simon Coveney, who spoke out about the bloated expectations of the agreement.
"It's too early to talk about whether it is possible to achieve a breakthrough this week, or whether it will happen next week," Simon Coveny said at a meeting of EU foreign ministers.
Finally, there was news that England was given extra time in terms of considering a withdrawal proposal. Thus, the European Union may hold an extraordinary summit at the end of October, that is, after a meeting of the European Council, where discussion of the exit will continue.
I would like to remind you that this week is quite strong in terms of emotional and informational mood, a spontaneous background can stir up speculators' interest and the upcoming meeting of the European Council can help answer many questions.
Today, in terms of the economic calendar, we have a data package for the UK, where the unemployment rate should remain in the same range of 3.8%. In turn, the average level of wages excluding premiums (Aug), according to expectations, should slow down from 3.8% to 3.7%, as in the case of the average level of wages including premiums from 4.0% to 3.9%.
At the same time, a statement by the head of the Bank of England Carney as well as the publication of the minutes of the meeting of the Bank of England Committee on Financial Policy is expected today. I don't think that we will see the events of this, something cardinal, since everyone is waiting for the day "X" according to Brexit.
Further development
Analyzing the current trading chart, we see that a new day began with a characteristic stagnation within the 1.2620 level, forming a local framework of 1.2600 / 1.2635. In fact, we saw a kind of versatile interest, where in the absence of emotions and proper trading volumes, the quote slows down. This kind of effect did not last long at about the Pacific and Asian trading sessions, after which fluctuations again ensued. So now, already in advance, the participants are returning to the market and begin to work on the information background, throwing us again to the maximum peak on October 11th. It is not yet clear what the jump is based on, perhaps the latest news about another EU summit, or maybe something else, but bloomberg is still silent, thereby continuing monitoring.
In turn, speculators have already earned on the existing impulse, as the saying goes "who gets up early ...". Work on the past stagnation within the level of 1.2620 [1.2600 / 1.2635] made it possible to enter the market at the best moment, but I think this will not end the day.
It is likely to assume that the peak of 1.2700 (+/- 10 points) will again play a periodic level of resistance, rolling back the quote and waiting for further information. Thus, a return to the limit of the level of 1.2620 is still possible, but with long positions, it is already worth waiting for a while, since you need to fix the price higher than 1.2710.
Based on the above information, we concretize trading recommendations:
- Buying positions, if you have, then you need to exit, unless of course you have already taken this right step, as soon as the quote got to the peak on October 11. We consider further actions after fixing the price higher than 1.2710.
- Selling positions will be considered after the quotation returns to the level of 1.2620, or in the event of a new stagnation or a characteristic overheating.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that the indicators against the background of emotional price spikes turned upward, practically without changes, keeping a buy signal. With indicator analysis, you need to be very careful, since against an abundant information background, indicators can be misleading.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 15 was built taking into account the time of publication of the article)
The volatility of the current time is 94 points, which is quite a lot for this time section. It is likely to assume that in the event of an increase in the information background and market emotions, volatility may continue to grow further.
Key levels
Resistance Zones: 1.2700 *; 1.2770 **; 1.2880 (1.2865-1.2880) **.
Support Areas: 1.2620; 1.2580 *; 1.2500 **; 1.2350 **; 1.2205 (+/- 10p.) *; 1.2150 **; 1,2000 ***; 1.1700; 1.1475 **.
* Periodic level
** Range Level
*** The article is built on the principle of conducting a transaction, with daily adjustment
