January 22, 2021

Market lull on the eve of the Black Swan?

The situation of recent days can be described as complete stagnation, a seasonal lull at the end October / early November this year especiallynoticeably. We note a very low volatility of market instruments and the absence of any news reasons, this only suppresses activity, which is reflected in the charts.

By and large, market dynamics are now dictatingin the short-term range, speculators who do their favorite thing: exploit trading ranges of 20-30 points, this is enough for them.

What caused this market lethargic sleep? We’ll try to figure out what’s going on,what are the development options. As a rule, such a situation transforms into something interesting, somewhere there are trading impulses that can lead to serious market fluctuations.

Now the situation was as follows: monetary policy, which also has an impact on the market, is in stagnation mode, you can call it that. The Federal Reserve reduced the rate last week, as expected, it did not present any surprises, the market was ready for it. The conference of Paul also did not give any new surprises, the dollar is predictably under pressure, being not far from its local lows. Actually, the dollar does not undertake kickbacks, which indicates the complete indifference of the players to the current trading situation. If we look at the chart, then fluctuations of 20-30 points are all that we can observe.

Traditional assets in this regard are not too different from crypto, crypto is also in consolidation mode and the range of fluctuations is rather narrow here.

Let's look at what driving factors are currently having or are not affecting market dynamics.

At this stage, interest in risk is characterized byas fundamental, it remains the main driver. We see that interest in risk remains high, but there is no further growth, investors remain in moderate optimism, market assets, which are traditionally associated with risk, are at their local maximums, asset safe have some pressure, no major fluctuations occur.

Brexit process faded into the background, postponementuntil January 2020. Accordingly, what will happen in the next 2-3 months is still difficult to predict, but we see that, as a rule, any postponement is accompanied by the usual bureaucratic procedures, which reduce all interest in the process to zero, the same thing happens here.

GBP / USD

GBP / USD dynamics dictated exclusivelythe brexit process and we see that volatility has decreased, activity has fallen and the pair is trading in a very narrow range, today it is 29-29.5. Nothing interesting happens, last week there was an attempt to grow towards 1.30, but the mark was not reached. Thus, the global barrier of 1.30 remains unbreakable, and this critical resistance will remain so for a long time to come.

Market lull on the eve of the Black Swan?

A decline below is not noted, a recent surge inside 1.28 is already forgotten. Now the pair practically does not fall below 1.29, which actually indicates an approximate balance of forces in the market between bears and bulls. This situation should continue in the near future. The trading range will narrow, traditionally forming a “triangle” or “wedge” on the chart, after which there will be a significant breakthrough in some direction, which actually confirms the formation of a “triangle” or “wedge” shape.

No other processes will affect the pound in the near future, so everything here depends on the news headlines related to the Brexit negotiation process.

EUR / USD

We turn to the pair EUR / USD, it is noted herequite confident advance of the pair up, but so far the 1,1180 mark is not broken, most likely, it is a matter of time. The pair will move higher and higher with time, the process will not be fast, the good liquidity of the pair does not contribute to sharp fluctuations.

Market lull on the eve of the Black Swan?

The decline is not noted here, it is thought that higher1.12 couple still will be able to pass this week, it is unlikely that progress will be significant. It seems to me 1.1250 - this is the maximum that can be expected in the current situation, and from below reliable support is in the region of 1.11.

XAU / USD

Now we will turn our attention to gold, herethe trading interval has been formed quite seriously: below $ 1480 and above $ 1520. This is $ 40 and will be the global medium-term interval, the mark of 1500 + - $ 20, that’s what you need to focus on.

Market lull on the eve of the Black Swan?

In case of a break above $ 1520: it's very likely it's time to resume growth somewherein the direction of 1540-1550 dollars, most likely this will be due either to a sharp increase in interest in the safe haven asset or to a serious wave of a decline in the dollar, or a combination of these two factors.

If gold falls below $ 1480: we can assume that the uptrend, if not reversed, then at least take a break.

The current state of gold is consolidation inarea mark $ 1,500 plus or minus for $ 20. In the near future, the trading interval is already narrower: below $ 1,500 - a psychological barrier and from above 1,515-1520 dollars. But as we saw, growth above $ 1515 meets new sales, so further growth seems unlikely in such a calm market.

Brent

Special attention is paid to the dynamics of oil, inIn particular, Brent today rose above $ 62. I have already said that any upward bounces should be used for long-term and medium-term short positions. In this case, the growth did not even reach $ 62.5 and again Brent oil is dropping, speculators have done their usual business. They find entry points for sale and most likely oil will drift to around $ 61-62 in the direction of $ 60, possibly even $ 59. I would like to note that last week the $ 59 mark stood, there was a rebound from it. A typical range is unlikely to be violated.

Market lull on the eve of the Black Swan?

Bitcoin

To conclude our review, we traditionallylet's turn to the crypto market, in particular to bitcoin. Here, after good fluctuations in recent weeks, there has been a lull, the fluctuations are quite narrow, if we are talking about Bitcoin then the corridor is 9000-9500 dollars. This range covers all fluctuations, sharp ups and downs of activity are associated with large deals, liquidity is not very high here, naturally large deals can lead to a movement of $ 100-200, but after that the price returns to its original state.

Market lull on the eve of the Black Swan?

For example, today we see that the rangethe fluctuations are no longer $ 500, but a little less than $ 200, this indicates that the consolidation process is being formed here, the technical side looks like that sooner or later growth will continue here.

As already noted, support is in the band 8900-9000 dollars and while Bitcoin is above these levels the probability of growth is large enough, with a break above $ 9,500, growth may resume in the direction of 10,000-10,500 dollars and so on. If Bitcoin drops lower than $ 8900-9000 and lingers below these marks, then bullswill again announce its surrender and Bitcoin will begin its advance even lower to the $ 8500 mark and may even be $ 8000. So far, the lows that we noted at the level of 7300-7400 dollars should not be expected. The technical picture is now more configured for growth than for a sharp drop.

This is the situation, I remind you that the currentThere are practically no statistics week. Everything will develop approximately according to its seasonal schedule, the market will be relatively calm, perhaps the news headlines will make adjustments, which are, in fact, the “Black Swan”, that is, unexpected events that can change the market situation. We are talking about unplanned events, and in the case of calendar things, there is nothing to fear for now, and the market lull will continue.

As a rule, we mark November as the lastactive month of the year, since after Thanksgiving in the USA, which is celebrated on November 28 this year, markets enter the phase of preparation for the Christmas and New Year holidays after this day, market activity is becoming less and less intense every day.

So we see now that activityis at a low level, if this continues throughout November, then I do not exclude the possibility that such a lull may go into December. We are completely dependent on unexpected factors in the face of the “black swans”, which include news headlines, these may be: unpleasant or pleasant surprises in the brexit negotiation process; or another aggravation of the United States and China trade war; or some third force that we don’t know and for which the market is least prepared. This third force can lead to a serious hesitation, but when and where it appears to say we can not.

Vasily Barsukov (Chief Dealer WELTRADE)