From the point of view of complex analysis, you can see that the quote went through most of the flat formation, and now let’s talk about the details.
The last trading day reflected the high activity of market participants where the quote managed to consolidate above the level of 1.2350 at the beginning of the Asian trading session, which was the starting point for the breakdown of last week’s maximum – 1.2392. Traders did not stop there, the inertial move was set by the market, a small push was enough for further growth. As a result, the pound has grown up to the forecasted level of 1.2500, and this, by the way, is 74% of the flat formation 1.2150 // 1.2350 // 1.2620.
Before going further, it is worth recalling that the upward turn is held on the market for at least 11 trading days, and its total value is more than 450 points. The existing scale violated the text component of the first of May, which means that the restoration process, which so many had hoped for, is postponed indefinitely.
Flat formation is what traders are currently focused on as a development prospect. It is worth considering one point – the market continues to pursue an emotional mood, in which the main positions are impossible. Thus, the tactics of local operations are still relevant in the market.
Analyzing the past trading day in detail, you can see that upward interest took place throughout the day, but at the same time, there were hours where long positions were most clearly expressed. I mean the section from 13:00 UTC+00 on the trading terminal, where the pound sterling is gaining more than 80 points in just two hours. When analyzing the time zone in detail, it becomes clear that the US dollar, which is being sold throughout the currency market, has come under pressure. Thus, the pound and its growth have nothing to do with it, and to say that things are going well in the United Kingdom is not worth it.
In terms of volatility, the highest indicator is recorded for twenty trading days, which is 38% higher than the average daily value. It is worth considering that the pair pound dollar and before the jump in over activity showed an intense fluctuation, which earned the status of acceleration.
As discussed in the previous review, traders worked in long positions, where the predicted level was the coordinates of 1.2500.
The news background of the past day contained the final PMI data in Britain, where the index of business activity in the manufacturing sector grew from 32.6 to 40.7, which can be considered a good hint of recovery.
A similar PMI index was published in the United States, where activity in the manufacturing sector increased from 36.1 to 39.8, which suggests that the situation is gradually normalizing.
In terms of the general informational background, we have large-scale riots in the United States after the death of George Floyd, which turned into real “street wars”. The noise was so great that the US dollar came under local sales. It is worthwhile to understand that this kind of panic is not considered the first in the USA, and it will soon backfire, which will return the buyers of the dollar.
In terms of the Brexit divorce proceedings, we have yet another comment from EU chief negotiator Michel Barnier, who told Prime Minister Boris Johnson in an interview with the Times that he might well be left without a deal, and this will be another blow to Britain, which is already experiencing serious crisis due to the coronavirus pandemic.
“It is likely that at a time when the United Kingdom is just beginning to get out of the recession, the country will face a number of new difficulties due to the lack of a free trade agreement with the EU. Disruptions in supplies, empty shelves in stores, and so on. This does not meet the interests of the government, which is so trying to create a positive vision for the citizens of the future,” said Simon Usherwood, an expert on European politics at the University of Surrey.
Thus, at this stage of the negotiations and the existing disagreement of the parties, a delay is simply necessary, but we all understand that the game of London is all-in tactics, where, having pressed to the last, they can manage to do what the Europeans are not ready to do now.
Today, in terms of the economic calendar, we have data on the UK lending market, where the number of approved mortgage loans fell from 56 thousand to 15.8 thousand. At the same time, the volume of consumer loans fell by another 7.399 billion pounds.
Analyzing the current trading chart, you can see the price consolidates above the level of 1.2500, which indicates the preservation of long positions and the lack of the proper volume of transaction fixations. In the current situation, traders are more and more inclined to bring prices closer to the border of 1.2620, where it will be clear: the flat formation remains or the first fundamental change in market ticks awaits us in a long time.
In terms of the emotional mood of market participants, it is worth highlighting a high coefficient of speculative operations, which will continue to put pressure on the activity and high volatility of the market.
It can be assumed that if the inertial course is maintained and the price is consolidated higher than 1.2560, the quote will go to the level of 1.2620, which will complete the cycle inside the flat formation. In order for significant changes in market ticks to occur, a quote must be consolidated above 1.2700, with subsequent consolidation at 1.2770.
Based on the above information, we derive trading recommendations:
– We consider purchase positions in the direction of 1.2620.
– We consider selling positions in two versions, the first assumes that the quote goes to the level of 1.2620 and slows down, after which a rebound in the structure of the flat formation. The second option considers the slowdown relative to the current values of 1.2475/1.2550, where the quote is consolidated below 1.2470.
Analyzing a different sector of time frames (TF), we see that the indicators of technical instruments on hourly and daily periods continue to signal a purchase due to a rapid upward movement.
Volatility per week / Measurement of volatility: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.
(June 2 was built taking into account the time of publication of the article)
The volatility of the current time is 76 points, which is another 42% lower than the daily average. It can be assumed that if the inertial behavior is maintained, volatility will continue to grow.
Resistance zones: 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: 1.2250; 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