Since the beginning of November, the Euro has strengthened in value by more than 300 points (+2.7%), which is considered a lot if you look at everything that is happening in the world objectively.
The sell-off of the US Dollar in connection with the ambiguous political life of the United States has already played on the nerves of investors. It's time for the Europeans to leave a mark on the trading chart.
Yesterday, during seven-hour video talks between German Chancellor Angela Merkel and regional authorities, it was decided to extend the previously imposed quarantine measures for another three weeks until Christmas. The decision was not easy, but circumstances are forcing Europe's largest economy to tighten restrictive measures due to a sharp increase in the incidence of diseases in the country.
Germany has registered a record increase in the number of new coronavirus cases, bringing the total to almost 1 million, hours after the government extended restrictive measures.
On Thursday morning in Germany had 32 687 new cases of infection, which led to an increase in the total number to 995 879 cases. The new figure exceeded the previous high of 31,480 set three weeks ago.
We should not forget that Germany serves as a kind of compass for the whole of Europe, and if the Chancellor says that times are difficult and it is worth further introducing and extending restrictive measures, then other EU countries will follow her.
Just the other day, the head of the European Commission, Ursula von der Leyen, warned that it is too early to ease restrictive measures and there is a risk of a third wave of the Coronavirus.
"I know that owners of shops and bars and waiters from restaurants want to remove restrictions but we must learn the lessons of the summer and not repeat the same mistakes. Relaxing too quickly is a risk of a third wave after Christmas, " said von der Leyen, speaking at a meeting of the European Parliament.
Investors are well aware that the European economy is not going through the best of times, and given the extension of restrictive measures, the situation may worsen, which will affect the depreciation of the European currency.
In terms of technical analysis, you can see that the Euro has recently become very overheated and the convergence of the price with the upper limit of the medium-term side channel affects the volume of long positions. The inertial move that took place in November may eventually lead to a sharp change in trading interest. The range levels of 1,1890/1,1900/1,1920 serves only as a variable boundary in the structure of the sideways trend. The maximum deviation can be up to the psychological level of 1.2000. Thus, the movement in the structure of the upper border of the seventeen-week side channel increases the risk of a price reversal from an upward to a downward move.
Restrictive measures by the EU can serve as information for speculators.
The scenario of a breakdown of the upper limit is also considered but a positive background is needed here; for example, a Brexit trade deal has a breakthrough and the parties are ready to conclude an agreement.
It is worth recalling that yesterday, the head of the European Commission, Ursula von der Leyen, dispelled the hopes of many traders, saying that the negotiations are at a crucial stage but key issues regarding fishing and competition still remain.
The market dynamics for November 25 was only 48 points, which is 37% below the average level. In fact, we have returned to the dynamics of the past week but it is worth considering that the market has a characteristic type of inertia with the manifestation of speculative interest.
Looking at the trading chart in general terms (daily period), it is clear that buyers are walking on the thin edge of sellers where a reversal can occur at any moment which will be due to technical analysis.
Today, in terms of the economic calendar, it is quiet and smooth. The only thing that could be paid attention to is the publication of the minutes of the European Central Bank's monetary policy meeting.
The main shock to the market is the lack of trading volumes due to a non-working day in the United States, where thanksgiving is celebrated.
Analyzing the current trading chart, you can see that during the Asian and the start of the European session, the market was dominated by upward interest, which was a kind of reflection of upward inertia. As a result, the quote tightly went higher than 1.1920. Then there were long positions being fixed, which led to a reverse move to the boundaries of the range level 1,1890/1,1900/1,1920.
There is an assumption that today, due to the fact that the market has a decrease in trading volumes, activity may be reduced and the quote will go into the consolidation stage.
As a perspective, we consider a change in the market direction, from ascending to descending, where the area of 1.1900/1.2000 will serve as a platform for reducing the volume of long positions.
Drastic changes in the market may occur in the event of an unexpected information flow, for example, on Brexit, or on the COVID-19 situation.
Indicator analysis
Analyzing a different sector of timeframes, it is clear that the indicators of technical instruments on the hourly and daily periods still signal for purchases, due to the inertial upward movement on the period earlier. Minute intervals signal a sale, due to a small price rebound.
The volatility for the week / Measurement of volatility: month, quarter, and year.
The measurement of volatility reflects the average daily fluctuation calculated for the month, quarter, and year.
(November 26 was based on the date of publication of the article)
The dynamics of the current time is 39 points, which is 49% below the average level. Due to the absence of a key player in the market (the United States), activity may be reduced.
Key level
Resistance zones: 1,1890-1,1900-1,1920**; 1,2000***; 1,2100*; 1,2450**; 1,2550; 1,2825.
Support areas: 1,1810*; 1,1700; 1,1612*;1,1500; 1,1350; 1,1250*;1,1180**; 1,1080; 1,1000***.
* Periodic level
* * Range level
***Psychological level
