Over the past trading day, the pound / dollar currency pair showed an extremely high volatility of 262 points. As a result of which, the quote literally flew to the peak of an oblong correction. From the point of view of technical analysis, we see not just a surge in prices, but a real rally of bulls, where everything started with a slight stagnation within the value of 1.2200 and ended with a jump in the direction of 1.2467, that is, overcoming all possible periodic levels. Analyzing the past hour by hour, we see that the trade began gradually, all in the same conditional stagnation within 1.2190 / 1.2250, but already at 14: 00-17: 00 [UTC+00 time at the trading terminal] a shot occurred and formed the whole movement of the past day. We will analyze the cause and effect a bit later.
As discussed in the previous review, traders carefully analyze the behavior of quotes relative to given boundaries [1.2190 / 1.2250] for possible impulse flashes, which in fact happened. Let me remind you that long positions were considered to a greater extent by speculators because of the characteristic risk, but in this case all the risks were justified, and they received a solid profit.
Considering the trading chart in general terms [the daily period], we see that the recovery process has gone into existence, and an oblong correction has confirmed its leadership in the market once again, returning us almost to the peak of an earlier fluctuation. Whether the global trend has changed - there is no way, it is still downward, and there are significant chances of its resumption. Let me remind you that the stage of formation of an oblong correction began after touching the historical lows of 1.1957 / 1.2000, after which the quotation went a rather long way of correction, reaching a maximum of 1.2580.
The news background of the past day contained data on industrial production in Britain, where the decline accelerated even more, from -1.1% to -1.8%. The United Kingdom's GDP figures surprisingly showed growth, but only relative to the projected value of 0.9%, but as a result, we still saw a decline from 1.3% to 1.1%. How did the pound respond to its statistics? In principle, it did not. The quote was just within the fluctuation 1.2190 / 1.2250 at this moment. Almost immediately after the publication of the statistics package, the Head of the Bank of England Mark Carney spoke and mentioned weak economic data and presented a new 20-pound banknote made of plastic. In principle, the Head of the Central Bank did not say anything special, and thus, there was no effect on the market. This afternoon, inflation data came out in the United States, where growth was forecast from 1.7% to 1.8%, but as a result, inflation remained at the same level as it was, 1.7%.
So what led to such a staggering leap in the market? That's right - another informational background regarding Brexit.
During the meeting between the two Prime Ministers Boris Johnson and Leo Varadkar, a rather optimistic statement was made that ways could be found for a possible agreement.
"The prime ministers held detailed and constructive negotiations. Both continue to believe that reaching an agreement is in the interest of all parties. They agreed that they can see the path leading to a possible agreement. "
As we understand it, the current negotiations with Ireland dealt with a burning customs issue, and when they say that there are solutions, the market immediately reacts, and in this case positively - the pound has rushed to growth.
In turn, French President Emmanuel Macron, during his speech on October 10, uttered a fairly correct phrase regarding the actions of London.
"If they do not want to take any steps or do something that is not accepted, they will have to take responsibility"
In principle, this reflects the current position of Europe regarding the protracted divorce proceedings.
Today, in terms of the economic calendar, we do not have statistics for Britain and the United States. In terms of informational background, a meeting of two Brexit negotiators Michel Barnier [EU] and Steve Barclay [UK] is expected, where the goal is to outline an action plan for an early settlement of the divorce process.
The upcoming trading week expects to be extremely eventful, if the statistics package is put on the back burner, then we have a two-day meeting of the European Council, where the issue regarding Brexit will be decided, and on Saturday there will be an emergency meeting in the British Parliament. Thus, the pressure on the pound is expected to be staggering, like possible impulse surges.
The most interesting events displayed below --->
Tuesday October 15th
Great Britain 8:30 Universal Time. - Change in the number of applications for unemployment benefits (September): Prev 28.2K ---> Forecast 30.0K
Great Britain 8:30 Universal Time. - Average level of salaries, taking into account bonuses (Aug): Prev 4.0% ---> Forecast 3.7%
Great Britain 8:30 Universal Time. - Unemployment Rate (Aug): Prev 3.8% ---> 3.9% forecast
Wednesday October 16th
Great Britain 8:30 Universal Time. - Consumer Price Index (YoY) (September): Prev 1.7%
USA 12:30 Universal time. - Retail sales
Thursday, October 17
European Council meeting October 17 and 18
Great Britain 8:30 Universal Time. - Retail Sales (YoY) (Sep): Prev 2.7%
USA 12:30 Universal time. - Number of building permits issued (Sep): Prev 1.425M ---> Forecast 1.365M
USA 12:30 Universal time. - The volume of construction of new houses (September): Prev 1.364M ---> Forecast 1.320M
USA 16:15 Moscow time. - Volume of industrial production (September)
Saturday, October 19
UK Parliament emergency meeting
Further development
Analyzing the current trading chart, we see that the market continues to be impulsive due to the same information background. The details of the surges are not yet 100% clear, but you can refer to the statement of the President of the European Council, Donald Tusk, who believes that there are promising signals for the deal. What kind of signals and in what heads they are, is not yet clear. Impulse details 8:40 -9:05 hours [UTC+00 time indicated by the trading terminal].
In turn, speculators continue the feast, riding on existing impulses, where in a short period of time you can make a daily profit.
It is likely to assume that the peak of elongated correction [1.2580] in a compartment with a level of 1.2500 may temporarily restrain the ardor of buyers, but for how long, this is a question, since the jumps can continue against the information background. It is worthwhile to understand that overheating of long positions already exists, and it remains only a matter of time, when we will also quickly go down.
Based on the above information, we concretize trading recommendations:
- We consider buying positions are made on a speculative background, depending on the incoming information. I consider flying into a position right now an extremely risky undertaking. Therefore, it makes sense to wait for a fixation already higher than 1.2580.
- We consider selling positions in terms of recovery, after fixing the price lower than 1.2480.
Indicator analysis
Analyzing a different sector of timeframes (TF), we see that indicators on all the main time intervals signal purchases, which is completely justified by the existing impulse move. Due to the information background, the integrity of indicators can be under pressure.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(October 11 was built taking into account the time of publication of the article)
The volatility of the current time is 132 points, which already exceeds 29% of the daily average. It is likely to assume that if the background of the current day goes down, then the volatility of the end of the day will go within the existing framework. It is worth considering in the work that the upcoming week in terms of information background is extremely saturated and the volatility is expected to be high.
Key levels
Resistance Zones: 1.2620; 1.2770 **; 1.2880 (1.2865-1.2880) **.
Support areas: 1.2500 **; 1.2350 **; 1.2205 (+/- 10p.) *; 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
