From a comprehensive analysis point of view, we see a rally in the direction of the level of 1.2770. As per the details, last week, the GBP / USD pair was in a bearish condition, where initially, during the local correctional movement, the quotes find resistance in the well-known level of 1.3000. After that, a sequential downward movement began, where initially the quotes went down to the support area on February 20, and then, against the background of inertia, an impulse was formed towards the lower border of the range 1.2770 // 1.2885 // 1.3000 .
The theory of downward development, which we touched upon in early February, is bearing fruit. The change in the clock component is already a fact, the future is a recovery relative to the medium-term downward movement, but for this new step, we need a regrouping of trading forces, where we will wait for a consolidation lower than 1.2770- 1.2750. We should not forget that the support of our theory may come from the noise of the negotiations between England and Brussels, on the basis of which new branches of the downward movement will appear.
In terms of volatility, we see the highest indicator since the beginning of the year, which almost doubled the average daily level. The activity of this type refers to non-standard, thus there is an assumption that there was a FOMO syndrome [Lost Benefit Syndrome] in local degeneration.
Details of volatility: Tuesday - 103 points; Wednesday - 115 points; Thursday - 86 points; Friday - 193 points. The average daily indicator, relative to the dynamics of volatility is 98 points [see table of volatility at the end of the article].
Detailing every minute of Friday, we see that the main turn of the downward movement occurred in the period 09:00 - 17:00 UTC [time at the trading terminal], which looked like a complete inertia. The subsequent fluctuation was in terms of rollback, which corresponds to all theories of overheating. It is worth considering that the initial judgment of consolidation is lower than 1.2770 which will lead to a further downward movement, however, it is not suitable in this case due to a sharp surge, where this breakdown is not considered the main one. At the same time, observe carefully the average levels of 1.2885 and the minimum of February 20, we have already said that their price has worked out and they will no longer have the proper effect on the quotes, which, in principle, has happened. This judgment will subsequently be brought to the level of 1.
As discussed in the previous review, traders were waiting for the breakdown of the February 20 low as a benchmark for short positions in the direction of 1.2770, which brought considerable income. Medium-term traders invariably are in downward positions, where income continues to grow, soon to be refilled to existing transactions.
The recommendation from Friday regarding the further downward movement coincided, resulting in an impressive profit.
[Sell positions are considered in case of consolidation lower than 1.2848, with the prospect of a move to 1.2820-1.2800 --- 1.2770, the move is in the form of steps.]
Considering the trading chart in general terms [the daily period], we see that a test run to the area of the lower boundary of the range 1.2770 // 1.2885 // 1.3000 has already been made, which means that local mining is 50 % relative to the medium-term upward movement was recorded. We are waiting for confirmation of this development.
Friday's news background had a housing price index according to Nationwide Britain, where the theme of growth accelerated from 1.9% to 2.3%. In fact, real estate indicators for the UK are powerful engines for the pound, but not for this period, there was no reaction. In terms of American statistics, we see that personal incomes grew by 0.1%, and expenses by 0.4%, which is not something cardinal. At the same time, wholesale inventories in the United States, according to preliminary data, decreased by 0.2%.
In terms of the general informational background, we see that the main round of noise comes from negotiations on a future trade agreement after Brexit, where everything is just beginning, and the risk of conflict of interest grows hourly. Let me remind you that the other day when the mandate of the negotiating position of Britain was published, the document referred to a tough exit if by June agreements on the main directions are not reached. Of course, we understand that the agreement is necessary for both parties and it will be concluded, but the fear and noise in the media will make the local market panic, where we will see good spikes, not in favor of the pound.
In turn, Britain is already dreaming of upcoming negotiations with the United States, which will begin this month, where England hopes to conclude a deal that will lead to an increase in the British economy by 3.4 billion pounds.
Today, in terms of the economic calendar, we have the final data on the index of business activity in the UK manufacturing sector, where growth is expected from 50.0 to 51.9. At the same time, data on the volume of mortgage lending is being published, where growth is possible from 4.6 billion pounds to 4.8 billion pounds, and the number of approved mortgage loans is growing from 67,241 to 68,200. The data are not bad, and it would be logical to see the strengthening of the pound, if not for the start of negotiations in Brussels with the participation of the main negotiators Michel Barnier from the EU and David Frost from Britain. As we understand it, the first days will be under close monitoring by the media, and thus the slightest dissatisfaction, criticism, etc. will be clearly set out in the headlines of eminent publications. All this can lead to noise and weakening of the pound.
Further development
Analyzing the current trading chart, we see that market activity is already showing where a local touch of the level of 1.2770 was made at the beginning of trading. In fact, the rollback that took place during the night session has already been won back, and the quotes show an increased interest in short positions. The main goal of our theory is to develop a downward movement, thereby we carefully monitor the behavior of the quotes relative to the level of 1.2770, since consolidation lower than 1.2750 can lead to a new stage of development.
From an emotional mood point of view, we see that the rate of speculative operations is high, and all this is expressed by chaotic bursts of quotes. It is worth considering that the likelihood of FOMO syndrome, in this case, is high.
By detailing the per-minute time span, we see that a round of short positions occurred at the start of the European session, which led to a return to the price level of 1.2770.
In turn, intraday traders left short positions due to the risk of a rebound, but at the same time, they carefully monitor the behavior of quotes and consolidation points, since the main goal remains unchanged.
Having a general picture of the actions, we can assume that chatter at the level of 1.2770 is possible, as well as a rebound from it, but we look further and analyze what will happen in the case of the recovery process. So, the recovery steps are in the values of 1.2620-1.2500 --- 1.2350 ---- 1.2150 ----- 1.1957, each subsequent breakdown is getting closer to the main goal of resuming the initial trend.
Based on the above information, we derive trading recommendations as follows:
- Local buy positions are considered in case of consolidation higher than 1.2850, with the prospect of a move to 1.2885
- Sales positions are considered in case of consolidation lower than 1.2750, note that you need the appropriate background, as well as inertia to stay in this direction, otherwise stagnation may occur.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that the indicators of technical instruments relative to all the main time intervals signal a sale. It is worth considering that with a speculative mood indicators at the minute and hour intervals are unstable.
Volatility per week / Measurement of volatility: Month; Quarter Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(March 2 was built taking into account the time of publication of the article)
The volatility of the current time is 88 points, which is a high value for this time section. It is likely to suggest that due to the strong background, as well as the prerequisites of FOMO, further acceleration of volatility may occur.
Key levels
Resistance Zones: 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support areas: 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
