From the point of view of a comprehensive analysis, it is possible to see a stable downward movement during the eleven trading days. Important price levels were reached during this period of time. Now, let's get to the details. Market participants initially managed to overcome the mirror level of 1.2350, the variable value as of April 21 (1.2250), and then completely hit the lows of April 7 (1.2166). It turns out that by Thursday the price had already entered the area of interaction between the trading forces 1.2150/1.2180. This can be considered as one of the best signals for the recovery process recently.
Initially, the quote was located in an inertial upward trend from the historical low of 1.1411. However, a flat fluctuation was formed on a 1/5-month scale 1.2150 (1.2250) // 1.2350 // 1.2620.
As for the theory of further development, we are still leaning towards a downward movement within the framework of the recovery process. The downward course in the flat structure is considered the most significant. On the basis of it, the theory can become real. In order to draw attention to the recovery process, the quote needs to work out half of the entire value of the upward move where there is the psychological level of 1.2000.
Analysing the past day minute by minute, you can notice a low activity. However, the quote managed to locally break through the low as of April 7 at 1.2166 ---> 1.2165. After that a rebound occurred.
As discussed in the previous review, at the time of the price approaching the reference point of support, market participants have already fixed short positions due to the high risk of a rebound. In turn, speculators have opened positions on a pullback.
In terms of volatility, a value of less than 100 pips has been recorded for the first time in six trading days which can be considered as a local slowdown. In this case, the control support locally restrained market participants.
Considering the trading chart in general terms [the daily period], you can see that market participants are on the edge of a flat formation, where in case of breakdown a triumphant recovery process will begin.
The news background of the past day contained weekly data on applications for unemployment benefits in the United States. The US recorded a slight improvement in the situation. However, the collapse of the labor market is clearly visible. Thus, the number of initial applications was 2 981 000, which is better than the previous week, but worse than the forecast of 2 500 000. The number of secondary applications was 22 833 000 which is better than the forecast.
The market did not react to the data on applications for unemployment benefits in the United States.
In terms of the general informational background, Andrew Bailey, the head of the Bank of England, said that the regulator was not considering the possibility of lowering interest rates to negative values. Bailey noted that the transition to a negative rate would be a very big step and would require extensive communications. According to banking analysts, if the coronavirus drags on, the Bank of England will have to lower interest rates to negative. However, this is a possible scenario for 2021.
The pound continues to experience the deepest decline among the currencies of developed markets. Since the beginning of the year, the pound has fallen by 8% and has dropped by almost 42% since the autumn of 2007.
In terms of the economic calendar, retail sales data in the United States will be released during the day which is expected to plunge to -12.0% from -8.4%.
A package of macroeconomic data in Britain and the United States is set for publication in the upcoming trading week. Quarantine measures introduced earlier in these countries affect their economies.
The most interesting events are displayed below --->
Tuesday, May 19
United Kingdom: unemployment (March) and claimant count change reports (April)
United States: new home construction and issued building permits (April)
Wednesday, May 20
United Kingdom: inflation and industrial production (March)
Thursday May 21
United States: applications for unemployment benefits, manufacturing PMI (May), services business activity (May), and sales in the secondary housing market April)
Friday May 22
United Kingdom: retail sales (April)
Further development
Analyzing the current trading chart, you can see a variable price fluctuation within the range of 1.2165 / 1.2240 where the lower border reflects the area of interaction of the trading forces 1.2150 / 1.2180. Market participants continue to consider a downward development. Otherwise there would be no pullback, but a full-fledged correction moving into a new tact. Thus, there is a great chance of a breakout of the control range. It is worth analyzing the dynamics of prices and fixation points as carefully as possible.
In terms of sentiment of market participants, we see an influx of attention to the current situation and the turning point of the current flat.
It can be assumed that the quote will continue to concentrate on the support at 1.2150 / 1.2180, where it is worth working on the breakthrough both on the main positions and on the local ones and considering a more significant rebound. For example, towards the values of 1.2300-1.2350.
Indicator analysis
Analyzing a different sector of time frames (TF), we can see that technical indicators on hourly and daily charts signal sell deals, which is confirmed by the general interest of market participants.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(Volatility on May 15 was built taking into account the time of publication of the article)
Currently, the volatility is 44 points, which is considered still a low indicator compared to the average daily value. We can assume that in case of a breakout of the level of 1.2150 volatility is likely to significantly increase.
Key levels
Resistance areas: 1.2250; 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: 1.2150 **; 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
