From the point of view of complex analysis, you can see the convergence of the price with the predicted level of the flat formation, and now let's talk about the details.
The past trading day managed to maintain a previously set upward mood, during which the quote was consolidated above the periodic level of 1.2500, thereby directing the quote towards the upper border of the flat formation 1.2150 // 1.2350 // 1.2620 .
What we have is an upward movement that has been held on the market for two and a half weeks, during which the quote resumed oscillation inside the flat formation and delayed the process of restoring the main trend for an indefinite period.
Should the existing inertial move be regarded as a new round of upward development that will resume the process set by the market at the end of March this year? The question is not simple, and if we consider it in terms of common sense, then the pound does not have growth prospects. So why is the English currency rising in price?The answer is simple: the pound sterling is not growing, but the US dollar is declining in value, which has come under local sale amid external factors.
It turns out that as soon as the pressure on the US dollar subsides, we will see the restraint of the British currency with a subsequent decline.
Regarding the trading approach, it is still advised to adhere to local operations, for the reason that the market is still unstable in terms of emotional mood. A high coefficient of speculative positions is maintained, which makes it possible to pass a fairly significant path in a short period of time. This gives us the opportunity not to sit out positions and miss out on possible profits, but as soon as the emotional mood stabilizes, we will return to the original tactic of combining the main and local positions.
In terms of volatility, a slowdown is recorded relative to the past day 183 ---> 97 points, which is quite considered the norm after sharp market jumps. It is worth considering that the dynamics of Tuesday is close to the gold level of 100 points, which means that the market has a healthy activity.
As discussed in a previous review, traders see the development of the course within the flat formation, where the convergence of prices with the border of 1.2620 is one of the prospects.
Regarding the trading recommendations, our deals have an upward nature, primarily towards the level of 1.2620.
Considering the trading chart in general terms, the daily period, it is worth highlighting that two months of fluctuations were recorded for the first time within the flat formation for such a significant upward trend in scale. At the same time, the descending bar of 05/01/20-15.05.20 has a superficial similarity in terms of dynamics with the current bar, and in general, we have a V-shaped formation.
The news background of the past day contained data on the UK lending market, where the number of approved mortgage loans fell from 56 thousand to 15.8 thousand. At the same time, the volume of consumer loans fell by another 7.399 billion pounds. That is, to summarize, we can say that the credit market in the United Kingdom continues to dig deeper and deeper.
In terms of the general information background, it is worth highlighting that the main pressure on the US dollar comes from the mass riots in the United States, which the West has not seen in terms of scale. The excitement of investors drives the dollar down, and the media heats up the interest of speculators in new jumps.
Regarding the United Kingdom, we have here a variable buzz related to the Brexit divorce proceedings, where there was a rumor that during the fourth round of bilateral negotiations, officials in the UK government are warning Boris Johnson about the need to reach an agreement before the fall.
"We need a broad agreement before the end of summer. We cannot conduct this conversation even in September or October," the source of the insider for the Financial Times quotes.
The deadlines are near and everyone perfectly understands this. In particular, the British Prime Minister, who plans to personally visit Brussels in June and hold a series of negotiations regarding the agreement on Brexit.
Now you understand that as soon as the noise of "street wars" in the United States subsides, the pound sterling crawls back under the uncertainty and timing of Brexit, and you just need to recall that the British economy is not going through the best of times, but Brexit and the pandemic only worsened the situation in the country.
As shown in the statistics, it can be seen that more than 100 large multinational companies have moved from London to Amsterdam because of Brexit, another 300 are in negotiations with the Dutch government.
Today, in terms of the economic calendar, we have an index of business activity in the UK services sector in May, where growth is possible from 13.4 to 28.0. In the afternoon, an ADP report will be published in the United States, where employment may decline by another 9.6 million, which is, in principle, ready for, if you refer to the weekly figures for the number of applications for unemployment benefits. At the same time, do not ignore the index of business activity in the US services sector, which is expected to grow from 26.7 to 36.4.
It can be recalled that all statistics may be irrelevant if the external background regarding the unrest in the United States continues.
Further development
Analyzing the current trading chart, we can see that the quote came close to the area of the upper border of the flat formation 1.2150 // 1.2350 // 1.2620 , where it slowed down and formed a variable range of 1.2565 / 1.2609. It is worth considering that price fluctuations within the flat formation remain on the market, and in order to see fundamental changes in market ticks, the quote must be consolidated above the level of 1.2700, with further confirmation at 1.2770.
In terms of the emotional mood of market participants, one should be prepared for subsequent bursts of activity, since the coefficient of speculative positions is still at a high level.
It can be assumed that, in the event of a decline in pressure from the external background of the United States, market participants can systematically find resistance in the region of resistance level 1.2620, where due to two-week growth, fixing long positions may occur and, as a fact, movement in the opposite direction the structure of the flat formation 1.2150 // 1.2350 // 1.2620.
Based on the above information, we derive trading recommendations:
- Buy positions are moving into active consolidations, due to the risk of a rebound from the level of 1.2620.
- Sell positions are considered in the case of execution of movement cycles inside the flat formation, where price consolidation below 1.2560 can give the first sell signal, in the direction of 1.2500.
Indicator analysis
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments on hourly and daily periods are still focused on the buy signal due to the rapid upward movement and price consolidation at the top of the flat formation.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(June 3 was built taking into account the time of publication of the article)
The volatility of the current time is 64 points, which is another 51% lower than the daily average. It can be assumed that in the event of a rebound or breakdown of the control level, we will see a rapid acceleration of volatility.
Key levels
Resistance zones: 1.2350 **; 1.2500; 1.2620; 1.2725 *; 1.2770 **; 1.2885 *; 1.3000; 1.3170 **; 1.3300 **; 1.3600; 1.3850; 1.4000 ***; 1.4350 **.
Support Areas: 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
