Over the past trading day, the pound / dollar currency pair showed a high volatility of 132 points but the movement was expressed as a V-shaped fluctuation. From the point of view of technical analysis, we see that there was still a breakdown of the accumulation of 1.2270 / 1.2350. However, the quotation failed to stay outside the lower border, and a rebound occurred within 1.2206, giving out as a result the same V-shaped oscillation. In fact, everything is not so bad. The V-shaped fluctuation in this situation did not carry something extremely bad, and the feet located outside the 1.2350 level were not touched, and during the Pacific and Asian trading sessions, partial recovery has occurred.
As discussed in the previous review, traders were out of the market for several days, and the breakdown of 1.2270 level, nevertheless, forced them to enter the short positions that are still held by traders. In principle, the current position is not so bad. The past stagnation and consolidation of the quotation below the level of 1.2350 give the prerequisites for a further downward move. Now, let's see what happens.
Considering the trading chart in general terms (the daily period), we see that the recovery process locally reached 60% relative to the elongated correction, but this is not enough to talk about the full return of sellers to the market. In fact, fixing the price below 1.2150 would give more confidence in terms of restoring the main movement, where we would just go into the framework of 70% recovery.
The news background of the past day contained data on business activity in the manufacturing sector (PMI) of Great Britain, where an increase was recorded from 47.4 to 48.3, however, this did not affect the pound sterling. In the afternoon, a similar indicator came out, but for the United States, where the PMI data from ISM showed a decrease from 49.1 to 47.8 with a growth forecast of up to 50.1. In fact, the dollar was locally under pressure.
The informational background displayed a riot of colors regarding Brexit. Thus, there was information that Prime Minister Boris Johnson on October 2 will unveil his "last" proposal for the European Union regarding Brexit. In fact, Johnson wants to deliver an ultimatum to the EU: negotiate Brexit on its terms over the next ten days or hold the so-called "Hard" exit. The prime minister's position to withdraw from the bloc on October 31, despite everything, remains as never before, and the goal of achieving a deal with the EU is on some secondary plan.
In turn, the representative of the European Commission's press service, Mina Andreeva, said that Britain had not submitted proposals on the situation with the Irish border after Brexit, which would satisfy all the requirements of the European Union.
"We did not receive any offers from Great Britain that would satisfy all the goals (backstop) that we reminded of and which achievements demanded. It is the United Kingdom that must present workable solutions that satisfy all the requirements of (backstop): preventing a tough border, maintaining cooperation between south and north (on the island where Ireland and Northern Ireland are located) and the economy on the whole island, protecting the EU's single market and place Ireland in it, "Mina Andreeva curled at a briefing
However, already on Wednesday night, The Daily Telegraph, citing the British Prime Minister's plan, wrote that Boris Johnson plans to make an offer to the European Union. According to which, Northern Ireland will remain part of the EU single market until 2025 after Brexit.
It is estimated that there will be a temporary border and customs checks between Northern Ireland and the Republic of Ireland in the Irish Sea.
In fact, there are a lot of questions on the available information, thereby continuing to follow the news feed.
Today, in terms of the economic calendar, we have an index of business activity in the construction sector in Britain, where the current level is 45.0. The main statistics burn us in the afternoon, where they will publish the ADP report on the level of employment in the private sector of the United States. According to preliminary forecasts, they expect a decrease in employment by 140 thousand, which may put pressure on the US currency if the forecast coincides.
Further development
Analyzing the current trading chart, we see that during the Pacific and Asian trading sessions, there was a recovery process relative to yesterday's fluctuation. In fact, the level of 1.2350 plays the role of resistance again, where the quotation works out. In turn, traders continue to work to lower, holding trading positions opened yesterday. The restrictive stop loss continues to be located above the level of 1.2350, in case the picture of the movement changes radically.
It is likely to assume that the fluctuation within the 1.2270 value will still remain in the market for some time, where we will get a number of possible scenarios in the end. As you already guessed, the main scenario is focused on the resumption of the downward movement towards 1.2150. On the other hand, the opposite plot is considered in the initial hovering within 1.2270 / 1.2350, where depending on the incoming information will be clear how strong the resistance level is 1.2350 in terms of its breakdown.
Based on the above information, we concretize trading recommendations:
- We consider purchase positions in the case of a clear price fixing above the level of 1.2350, preferably with a yield of 1.2390.
- Many traders already have positions for sale, and they are sent towards the subsequent level of 1.2150. If we do not have positions, then it makes sense to wait and enter after fixing the price lower than 1.2200, with a prospect of 1.2150.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that indicators on the main spectrum of periods signal a further decline. In turn, the short-term period took a neutral position in connection with local stagnation.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 2 was built taking into account the time of publication of the article)
The current time volatility is 55 points, which is a normal indicator for this time section. It is likely to assume that if the information background is forced, the volatility of the day may again be higher than the daily average.
Key levels
Resistance zones: 1.2350 **; 1.2500 **; 1.2620; 1.2770 **; 1.2880 (1.2865-1.2880) **.
Support areas: 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
