Using complex analysis, we can see extremely low activity, where even the breakdown of the periodic flat of 1.3115/1.3150 did not give the desired result. In fact, the upward movement that was set days earlier is holding back sellers who cannot fully enter the market without proper trading volumes. This judgment is confirmed if you make a reference to the EUR/USD currency pair, which over the past days, showed active downward interest. The GBP/USD pair correlating with it also locally broke the lower limit of the range in the same period of time. The range of 1.3115/1.3150 was not broken, as there were not enough volumes, and the local surge is a partial reflection of the EUR/USD.
Based on the above information, the theory of fracture of the Zigzag-shaped model has a basis for reflection. As discussed in previous reviews, the Z-model has been compressing the quote for a long time, which should have led to a significant surge in activity with a fracture of the existing fluctuation frameworks. A surge of activity has occurred, but there are no fundamental changes, hence the assumption arose that we have an increasing inertial course, which will lead to a more significant change. Thus, referring to the stability of the quotes in the past day, this assumption takes on a real basis, which was previously not the case. However, no matter how beautiful it sounds, I still have one thought: if the assumption is the same, then we see a growing inertial course, which hypothetically can lead to values such as 1,3300 and 1,3500. This signal indicates that the medium-term trend continues to make adjustments to the global trend, and in the light of possible economic problems in Britain, it is not entirely logical. Because of this, I would not rush to make final conclusions yet, but look at the price behavior instead.
In terms of volatility, we see another slowdown relative to the previous day, where the daily candle is 41% lower than the average value. This signals the restraint of market participants.
Analyzing the past day by the minute, we see a steady sideways movement of 1.3115/1.3150, where the lower border was broken locally during the period 14:00-16:30 London time [time on the trading terminal]. The subsequent fluctuation returned the quote back to the specified limits.
As discussed in the previous review, speculators considered a temporary flat as a starting point for the future movement, however, expectations were not met. The price did not break the border of 1.3115, although positions were open.
Looking at the trading chart in general terms [the daily period], we can see that the structure of the medium-term upward movement began to form a slowdown, expressed in the local sideways course.
The news background of the previous day included data on applications for unemployment benefits in the United States. The indicators on the said data were good, as primary applications increased by 6 thousand. The repeated ones, on the contrary, decreased by 37 thousand.
The statistical data did not garner market reaction. The strongest background on EUR/USD was caused by the ECB meeting, which we will discuss in this article.
In terms of the general information background, we have the completion of Brexit. It was first approved by the UK Parliament, and afterwards was signed by Queen Elizabeth II. The European Union signed it today.
"Today, I signed the agreement on UK's withdrawal from the European Union, together with Ursula von der Leyen. Things will inevitably change, but our friendship will continue. We are starting a new chapter as partners and allies, " said European Council President Charles Michel
On January 29, the agreement is expected to be ratified in the European Parliament. On January 31, at 21:00 London time, Brexit will take place.
The schedule of subsequent actions looks like this:
February 25 - around this date, the 27 remaining heads of the European Union will sign a mandate to hold talks, which will allow official negotiations to begin.
The final deadline for extending the transition period is at the end of June. A number of agreements should have already been reached by this date.
December 31 - the transition period ends. If the parties do not agree on a deal, UK cannot trade with EU under the terms of the World Trade Organization.
Today, in terms of the economic calendar, we have preliminary British PMI data, where the manufacturing sector is expected to grow from 47.5 to 48.9. Meanwhile, the services sector is expected to grow from 50 to 51 [Markit]. In the second half of the day, similar data will be released for the United States, where the manufacturing sector is expected to grow from 52.4 to 52.5, and the services sector from 52.8 to 52.9 [Markit].
The upcoming trading week is expected to be extremely busy due to the two meetings of the Fed and the Bank of England. These meetings will interest both investors and speculators, who try to make money on local bursts of activity.
The most interesting events are displayed below - - - >
Monday, January 27
US 16:00 London time - Sales of new homes (m/m) (Dec): PREV: 1.3% - - - > Forecast: 0.8 %
Tuesday, January 28
US 14:30 London time - Orders for durable goods
Wednesday, January 29
US 20:00-20:30 London time - Fed meeting, followed by a press conference
Thursday, January 30
13:00 London time - Bank of England's meeting, followed by a press conference
US 14:30 London time - GDP (preliminary)
Further development
Analyzing the current trading chart, we can see a continuous fluctuation within the same range of 1.3115/1.3150, where the amplitude is extremely small. In fact, the characteristic restraint is still there, which is alarming, since there's a chance and reasons of acceleration. Now, the question arises as to how much this restraint will be enough. I suppose that there is a certain setting of prospects now.
In terms of the emotional mood of the market, we can see that the trading volumes have fallen, and market participants have taken a short pause, which may later result in an acceleration.
By detailing the time interval every minute, we can see the price fluctuation from the lower border of the corridor, where the candle structures have local impulses.
Because of this, speculators have insured their previously opened short positions, in the form of restrictive orders above the range. At the same time, they are working on the position of the shifter in case of continued movement
All in all, it is possible to assume that the market activity will still surprise us. For now, we need to take a break and understand how the price will behave. The trading strategy is selected according to the method of local positions relative to the corridor, where trading volumes will flow into the positions gradually in order to minimize the risks of a false movement.
Based on the above information, we have these trading recommendations:
- Consider buying positions if the price fixes higher than 1.3180. Speculative positions can be as low as 1.3155.
- Some market participants already have positions for sale, where they are advised to use a stop loss restrictive order. If you don't have any deals, wait for the price to fixed below 1.3095.
Indicator analysis
Analyzing the different sectors of the timeframes (TF), we can see that the performance of the technical instruments are keeping the quotes in a given range, protecting the upward interest. In case there's hovering in the accumulation, variable signals relative to smaller time sections will appear.
Volatility for the week / Volatility Measurement: Month; Quarter; Year
The volatility measurement reflects the average daily fluctuation, and is based on the calculation for the Month / Quarter / Year.
(January 24 was based on the article's time of publication)
The volatility at the moment is 29 points, which is an extremely low value for this section of time. Most likely, if the accumulation process is delayed, the volatility will still be at low levels. Acceleration will occur as soon as the main movement is selected relative to the range.
Key level
Resistance zones: 1,3180**; 1,3300**; 1,3600; 1,3850; 1,4000***; 1,4350**.
Support areas: 1,3000; 1,2885*; 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
**** This article is based on the principle of conducting a transaction, with daily adjustments.
