From the point of view of complex analysis, we can see that the slowdown observed before underwent another slowdown. The past trading week was expressed in a narrow framework, where the well-known level of 1.0775, which market participants had been focusing on for more than one week, served as the lower border. The upper limit was the area of 1.0850 / 1.0880, where the first value is known as the mirror level, and the second is its deviation. Analyzing it deeper, the deceleration of 1.0775 / 1.0850 (1.0880) is just a part of the wider flat formation of 1.0775 / 1.1000, which has been developing on the market for almost a month and a half. The existing fluctuation in the lower part of the main flat is considered the most impressive in terms of residence time for the last period, so it can be characterized as accumulation, which may lead to the resumption of the previous trend.
As indicated by both technical and fundamental analysis, the downward course is still followed, so, in the last review, a comparative analysis of the measures of the EUR/USD and GBP/USD currency pairs was performed, which revealed that both instruments are on the verge of drastic changes. The pound has already managed to pass the first signal level, confirming the theory of a cardinal change, which subsequently can lead to a significant recovery relative to the main trend. Meanwhile, the EUR/USD pair is still in the previously specified area, which confirms the assumption of the existing accumulation process and possible breakdown of the control level, which may lead to a similar development like the GBP/USD pair.
[To thoroughly understand market ticks and the meaning of the theory, read this article on the pound - link ]
Analyzing Friday's trading by minutes, we can see that the main activity occurred at 13:30-17:30 (UTC+1), caused by the news published that day. Afterwards, the pair showed low dynamics.
As discussed in the previous review, market participants regarded short positions as the main ones, but the movement for such is a consolidation below 1.0760, which did not happen, so local transactions in the said time section again became relevant.
The recommendation last Friday regarding local deals brought traders a small, but still profitable trading deposit.
[Buy positions were opened after quotes consolidated above 1.0825, towards 1.0850.]
In terms of volatility, a 35% acceleration was recorded relative to Thursday, but Friday's activity was all exactly low compared to the average daily value. Such dynamics once again confirms the process of accumulation in this period.
Meanwhile, analyzing the daily chart, we can see that the last two months reflect a high activity, but with such dynamics, the final mood does not differ from the aspen trend.
The news on Friday contained the second estimate of European GDP, where a -3.2% economic decline was recorded in the first quarter.
The market did not react to such data.
In the afternoon, the data on retail sales in the United States was published, the decline of which accelerated from -5.7% to -21.6%. The weak statistics for the US did not end there, as data on mixed production came out later on, which recorded a decline from -4.9% to -15.0% as well.
Market's reaction to such data decreased the demand on the US dollar, so a 50-point surge in activity was observed.
Meanwhile, the Fed delivered a gloomy forecast on the global financial markets, saying that the economy may collapse again if the situation with the coronavirus develops according to an unpredictable scenario.
"The value of assets remains vulnerable to a significant decrease, if the pandemic develops in an unpredictable direction, such as unfavorable economic consequences or difficulties in the financial system," the Fed said in a report.
The regulator also notes the difficult situation in the real estate market, which includes the commercial and agricultural sectors.
There are no important statistics today that could affect Europe and the United States, so the main focus is on the information background, as well as on the speculative mood of market participants.
Further development
Analyzing the current trading chart, we can see the fluctuation of quotes in the same variable range of 1.0775 / 1.0850 (1.0880), which means that the accumulation of trading forces continues. The main goal is the breakdown of the lower border, which will push the quote to the recovery process and update of the historical lows. The process will not be fast, so it is possible, and even necessary, to have local positions, which will bring considerable profit all the way.
The fluctuation in the range of 1.0775 / 1.0850 will remain for a long time, so work both within the established framework and for a break downwards.
Based on the information above, we formulated these trading recommendations:
- Open buy positions in case of price consolidation above 1.0830, towards 1.0850. Consider a deeper move when quotes consolidate above 1.0860, towards 1.0880–1.0900
- Open sell positions below 1.0795, towards 1.0775, when quotes consolidate below 1.0760, in the direction of 1.0700–1.0650.
Indicator analysis
Analyzing the different sector of timeframes (TF), we can see that the technical tools on hourly and daily periods are still prone to a downward trend, signaling sales, which confirms the development theory.
Volatility per week / Measurement of volatility: Month; Quarter; Year
The measurement of volatility reflects the average daily fluctuation calculated by Month / Quarter / Year.
(May 18 was built, taking into account the time of publication of the article)
Volatility is currently 29 points, which is considered low, relative to the average daily value. As soon as the accumulation process is completed and the lower boundary falls, a significant acceleration of volatility relative to the earlier periods will be observed.
Key levels
Resistance zones: 1.0850 **; 1.0885 *; 1,1000 ***; 1.1080 **; 1,1180; 1.1300; 1.1440; 1.1550; 1.1650 *; 1.1720 **; 1.1850 **; 1,2100
Support Areas: 1.0775 *; 1.0650 (1.0636); 1,0500 ***; 1.0350 **; 1,0000 ***.
* Periodic level
** Range Level
*** Psychological level
