Local jumps were observed yesterday, but they did not lead to any major changes in the market. The quote still traded within the range 1.1400 / 1.1460, with just a slight deviation of 5-10 points, which indicates high pressure from the conditional limit, where the volume of long positions is automatically reduced. A breakout from the value 1.1460 will lead to an upward move to the level of 1.1496, which is the highest value reached in this current year. In order for the medium-term trend to change, a stable support from the news is needed, since speculative mood alone is not enough for it.
Thus, analyzing the past trading day in detail, we can see a reverse V-shaped pattern which appeared from 05:00 to 14:30 (UTC+1), where speculative jumps within the established range were observed.
As discussed in the previous review, most traders did not trade within the established range since the risk is higher than expectations. Instead, the most optimal trading tactic is the strategy of breaking one of the limits.
As a result, a gradual normalization of volatility was recorded, where the current indicators of 65–80 points reflect a decrease in the emotional mood of the market, which will have a positive effect on technical and fundamental analysis. Full recovery is still a long way off, and this is confirmed by the high speculative ratio in relation to short-term time periods.
Meanwhile, analyzing the trading chart in general terms (daily period), a recovery occurred which took almost 3.5 months, but 80% of the whole process took place in just 4 weeks, which indicates overheating and instability of the entire structure.
As for news, there were no macroeconomic reports for Europe and the United States yesterday, but there was news on the EU summit, which finally ended with agreements on overcoming the economic consequences of the coronavirus pandemic. For these purposes, € 750 billion will be allocated, € 390 billion of which will be provided in the form of grants for various medical measures such as prevention and the purchase of vaccines, as well as medical equipment. The other € 360 billion will be provided in the form of low-interest loans, which can be used for a wider range of needs including social ones.
Meanwhile, the EU budget plan adopted at the summit was agreed to be € 5 billion, and this will be given to countries affected by Brexit. According to French President Emmanuel Macron, the seven-year budget has doubled, having a volume of € 1.824 trillion.
However, all these did not lead to an increase in the European currency, as it is already significantly overbought, and the program of financial assistance to the eurozone economy may not be as effective as it looks. Many countries in the European Union are already experiencing debt problems, and new loans can only aggravate their financial situation in the future.
As for the United States, former Fed Presidents Janet Yellen and Ben Bernanke warned that the recovery of the US economy after the coronavirus crisis could be slow and uneven, so the Congress must expand its support for the economy.
"The longer the recession lasts, the greater is the damage to the financial condition of households and businesses, and the longer it will take to recover the damage. To enable local and state governments to continue to provide essential services and avoid the recessionary consequences of large cuts in local and state spending, federal support must be significant and not overly restrictive for aid delivery," Yellen and Bernanke said.
Today, there are no available macroeconomic reports that could affect the market, so trading would continue to depend on the news surrounding the EU summit.
Further development
Analyzing the current trading chart, we can see bursts of activity that were limited by the range 1.1400 / 1.1460. The longer the price stays in one place, the sharper the exit from the range, where there are already characteristic signals of instability.
Most traders are also working for a breakout from the range 1.400 / 1.1460, which makes it possible not only to balance risks, but also to try to catch the main price impulse.
Hence, based on the above information, we present these trading recommendations:
- Sell positions below 1.1400, in the direction of 1.1380 - 1.1350 - 1.1300.
- Buy positions higher than 1.1470, towards the value 1.1496.
Indicator analysis
Analyzing the different sectors of time frames (TF), we can see that the indicators of technical instruments in the minute period signal "sell" since the quote is still working towards the lower limit of the range. The hourly period, meanwhile, still signals "buy" which indicates that the quote is still within the range. As for the daily period, everything looks at the upward trend in general terms.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The measurement of volatility reflects the average daily fluctuation calculated by Month / Quarter / Year.
(July 21 was built, taking into account the time the article is published)
The volatility at this current time is 43 points, which is 43% below the daily average. It is assumed that if the range [1.1400 / 1.1460] holds in the chart, volatility will remain low.
Key levels
Resistance zones: 1.1440 / 1.1500; 1.1650 *; 1.1720 **; 1.1850 **; 1.2100
Support Zones: 1.1350 1.1250 *; 1.1.180 **; 1.1080; 1.1000 ***; 1.0850 **; 1.0775 *; 1.0650 (1.0636); 1.0500 ***; 1.0350 **; 1.0000 ***.
* Periodic level
** Range level
*** Psychological level
Also check the hot forecast and trading recommendation for the GBP/USD pair here, or the brief trading recommendations for both the EUR/USD, GBP/USD and USD/CAD pairs here.
