From the point of view of complex analysis, we can see a rapid downward move, which eventually worked out most of the previous impulse. A bearish mood persisted yesterday, during which the quote rebounded from the 1.0880 area and headed towards the level of 1.0800. The surge in activity on May 12, which was more than 80%, may be attributed to traders who are working on a downward movement, since the quote was held in the lower part of the conditional sideways corridor 1.0775 // 1.0850 // 1.1000.
A decrease is still the priority of traders, but in order to gain a significant part, quotes must consolidate below 1.0775, and then go to the level of 1.0700. Such case may update March 20's high.
Analyzing yesterday's trading by minutes, we can see a local surge of long positions at 11:00-13:00 (UTC+1), where the coordinates of 1.0880 were affected. At the US session, bearish mood arose, which managed to pull the quotes to the level of 1.0811.
In terms of volatility, activity equal to the average daily value was recorded. High volatility is already typical for the entire market, as for example, the GBP/USD currency pair, has recorded a value over 100 points for six days in a row.
As discussed in the previous review, traders worked on local operations from a standstill within the mirror level of 1.0850, where they could earn both long and short positions.
Analyzing the daily chart, we can see that the variable range of 1.0775 // 1.0850 // 1.1000 continues to be on the market, but the concentration of short positions in its lower part may give a signal for a downward movement.
Yesterday's news contained data on industrial production in Europe, where the pace of decline has accelerated significantly from -2.2% to -12.9% for already 17 months in a row. The picture is terrifying, but the market ignored the statistics, being in a kind of shock.
In the afternoon, data on producer prices in the United States was published, where a -1.3% decline was recorded, which is considered a direct signal to deflation. However, the US dollar ignored this and continued to strengthen.
The market reaction, or the lack thereof, is caused by the global risks and impact of the quarantine measures in the economy. Investors do not jump from asset to asset, but try to wait out the storm in one thing.
Meanwhile, Fed Chairman Jerome Powell made a speech at the Peterson Institute of World Economy, and warned of a prolonged economic downturn, where the United States will need to spend more resources to localize the crisis caused by the coronavirus pandemic.
"It will take some time to get back to where we were. There is a feeling that recovery may go slower than we would like. But it will come, and it may mean that we need to do more," Powell said.
Powell also noted that the current recession is significantly worse than what happened after World War II. Thus, economic recovery will be gradual, and the provision of additional assistance to homeowners and businesses by the state is justified if it wants to avoid long-term damage to the economy.
Powell also responded to the White House's demand to introduce negative rates in the country, to which he replied that he is not going to consider the issue and introduce negative rates.
The weekly report on US unemployment will be published today, where a decrease in the number of unemployed, compared to last week, is expected. However, the figure may still reach 2,450,000, and repeated applications may continue to set anti-records, at about 25,650,000.
Further development
Analyzing the current trading chart, we can see that the quote is already in the region of 1.0800, and maintains a bearish mood. About 25 points remain before reaching the control mark, which means that the chance of reaching the level of 1.0775 and its breakdown is high.
The convergence of prices with the control level can lead to the activation of not only the main positions, but also local ones.
Movement to the level of 1.0775 will resume soon, but main transactions will occur after a consolidation below 1.0760, towards 1.0700. Consider local deals after a slowdown and rebound from the area of interaction of trade forces 1.0765 / 1.0785.
Based on the information above, we formulated these trading recommendations:
- Sell positions are already being held by traders in the direction of 1.0775. Subsequent transactions are expected, after a consolidation of prices below 1.0760, towards 1.0700.
- Open buy positions when quotes rebound from the area of interaction of trade forces 1.0765 / 1.0785, towards 1.0850.
Indicator analysis
Analyzing the different sector of timeframes (TF), we see that the indicators of technical instruments on hourly and daily periods, prone to a further decrease, signal sales.
Volatility per week / Measurement of volatility: Month; Quarter; Year
The measurement of volatility reflects the average daily fluctuation calculated by Month / Quarter / Year.
(May 14 was built taking into account the time of publication of the article)
Volatility is currently 29 points, which is considered extremely low for this time period. If the area of interaction of trading forces remain stable, volatility will remain at the specified level, below the average daily value.
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
