In terms of theories of market development, we have confirmation, as well as the execution of the Zigzag-shaped model [03.12.19-14.01.20; D1]. Thus, the third phase of correction within the model has begun to form a move, where it has already reached a control point in the face of the psychological level of 1.3000. This means that the compression of the entire model has reached the finish line, which may lead to more acceleration, which many hope. In this development, a restrained downward interest plays an interesting role, which seems to signal that the Zigzag-shaped model will reveal its potential in this direction.
In terms of volatility, we see that extremely low indicators stood out last week, as if preparing the platform for future acceleration. It was Friday, and there was a surge in activity just that day, giving us 113 points. The emotional mood of the market clearly signaled a high speculative interest, having a kind of similar symptom of FOMO [Lost Profit Syndrome].
Analyzing every minute on Friday, we see that the main burst of activity occurred in the period 8:30-20:30 [UTC+00 time at the trading terminal], where a pulsed inertial downward movement took place.
As discussed in the previous review, traders initially worked with long positions from the value of 1.3201, where there were complete fixations of trading operations after reaching the key range of 1.3100-1.3122. The next step was to identify acceleration, where we saw sharp pulsed jumps down just in the range of 1.3100-1.3122 , where many also flew into short positions and, already switched to fixing trade deals within the psychological level.
Considering the trading chart in general terms [the daily period], we see the Zigzag-shaped model at the peak of the six-month upward movement. Do not forget that the global downward trend remains unchanged, which strategic traders are guided by.
The news background on Friday included statistics on retail sales in the United Kingdom, which seemed to stir up the market. So, initially they predicted an acceleration in sales of up to 2.6%, which caused considerable interest in terms of the possible growth of the pound, but everything went cardinally not as expected. At the same time, retail sales came out with an indicator of 0.9%, which almost instantly set the downward trend for the pound sterling.
In terms of the general informational background, we have the comments of the Minister of Finance of Britain, Sajid Javid, in the direction of business. So, the Minister of Finance urges business representatives to adapt to the new reality.
"There will be no equalization of legislation; London will not follow EU rules. We will cease to be in a single market and will not be members of the Customs Union. We will do all this before the end of this year. British companies will soon need to learn how to adapt to the new reality," said Sajid Javid.
In turn, Prime Minister Boris Johnson is already preparing restrictions for low-skilled migrants moving to the United Kingdom. The new rules will take effect on the first day after the end of the Brexit transition period.
Today, in terms of the economic calendar, we do not have statistics. In addition to everything, the United States is not working due to the celebration of Martin Luther King Day.
Further development
Analyzing the current trading chart, we see that the inertial downward move set on Friday is still preserved in the market, where the quotes manages to fix below the psychological level of 1.3000. In fact, we have a kind of attempt to break through the compression of the Zigzag-shaped model, thereby accelerating the pace of the market. In this development, it is worth paying close attention to the 1.2950 / 1.2955 area, since it is who plays the role of the lower boundary of the psychological level of 1.3000.
In terms of the emotional mood of the market, we see that a high coefficient of speculative positions remains, which can be reflected in a further increase in volatility.
By detailing the per-minute portion of time, we see that there was a narrow consolidation at first along the level of 1.3000 [00: 00-04:00 UTC+00 time on the trading terminal]. Then, closer to the start of the European trading session, the inertial downward move resumed.
In turn, traders closed previously open short positions due to the risk of another rebound. Therefore, new short positions will be considered after fixing the price lower than 1.2950 / 1.2955.
Having a general picture of actions, it is possible to assume that compression theory is currently a priority, since in the event of a fracture, the next jump of activity will arise. Therefore, it is worthwhile to carefully consider the 1.2950 / 1.2955 area. In case of breakdown, the compression will be considered broken. As in any plot, there are alternative variations, and so, in this case, they are considered in terms of lateral walking along the level of 1.3000.
Based on the information above, we derive trading recommendations:
- Buy positions are considered in case of price fixing higher than 1,3015, the first local entrance.
- Selling positions are considered if prices are fixed below the 1.2950 / 1.2955 area, with the first prospect of a move to 1.2904. After the breakdown of the first point and fixation below it, the extension is made to 1.2885-1.2770.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that the performance of technical instruments due to the inertial move unanimously changed the mood from upward to downward, which confirms the behavior of the market.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(January 20 was built taking into account the time of publication of the article)
The current time volatility is 37 points, which is still a low indicator. It is likely to assume that in the event of a breakdown of the control region of 1.2950 / 1.2955, local acceleration of volatility may occur.
Key levels
Resistance Zones: 1.3000; 1.3180 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Areas:, 2885 *; 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 built on the principle of conducting a transaction, with daily adjustment
