EUR/USD – 4H.
As seen on the 4-hour chart, the EUR/USD first performed a reversal in favor of the US currency and a return to the correction level of 100.0% (1.1107), after which it closed at this Fibo level. As a result, the chances of a continued fall in quotations in the direction of already known lows significantly increased around the correctional level of 127.2% (1.1025), which bears already got a couple of weeks ago. Why did the euro fall on Monday? First, a good report on durable goods orders in America. According to official statistics, the volume of orders in July increased by 2.1% y/y, after rising in the previous month and 2.0% y/y. That is, there is not just an increase in the indicator, but also an increase relative to the previous value. The most important indicator, not taking into account defense and aviation orders, grew by 0.4%, although traders expected to see a decrease of 0.1%. Secondly, as I said on Monday, Jerome Powell at a speech at Jackson Hole did not tell traders anything. His performance did not surprise, please, and disappoint us. Against this background, it was a little surprising to see the sharp rise of the euro. But with the arrival of Monday, traders probably realized that the growth of the euro was unreasonable and returned to the sales of the euro/dollar pair.
What to expect from the currency pair on Tuesday?
In yesterday's review, I wrote that some of the bears left the market. Today, we can say that the same part of the bears returned to the market. As the pair completed the closing under the Fibonacci level of 100.0% (1.1107). Today, I expect the continuation of the falling of quotations in the direction of the correctional level to 127.2% (1.1025). Bulls are not in the market and just watching the situation and the actions of the bears. There won't be much news today. I will pay attention only to the GDP in Germany for the second quarter, but I do not believe that traders rush into the attack after the publication of this report. Rather, it is interesting to determine the overall trend in the European Union, as Germany is the leading economy of the EU27.
The Fibo grid is built on the extremes of May 23, 2019, and June 25, 2019.
Forecast for EUR/USD and trading recommendations:
I recommend buying the pair today with a target of 1.1180 if traders manage to close above the correction level of 100.0% again.
I recommend selling the EUR/USD pair now with the target of 1.1025 since it was closed under the correction level of 100.0% (1.1107). The bears returned to the market, and the euro is once again preparing for a weakening.
GBP/USD – 4H.
Do you remember the last time anything optimistic happened in the British Kingdom? When was the last time the country's leaders came to a mutual agreement with EU leaders? Now, it is quite difficult to remember these days and moments. The new British Prime Minister, who easily won the election, manages to conflict with the European high officials and does not enjoy support in his Parliament. According to the Labor Party, the question is closed, this is the main opposition party, and it should not support Conservatives. However, on such an important issue as Brexit, which has been dragging on for three years, unity in Parliament is necessary. But he's gone. Also, Boris Johnson and, for example, Donald Tusk, President of the European Council, recently staged a skirmish with mutual insults. In particular, both politicians called the opponent "Mr. Brexit without a deal." Negotiations with German Chancellor Merkel and French President Macron also failed and Johnson returned to Britain with nothing. He returned and began to prepare for the suspension of the Parliament for 5 weeks. At least that's what insider information says. Johnson, according to this information, requested a legal assessment of the suspension of Parliament from Attorney General Jeffrey Cox. It is not known whether Johnson will take such a difficult step and whether Parliament will get ahead of him by adopting an amendment that prohibits Johnson from taking such actions. But the fact remains: Johnson cannot agree with the European Union on new negotiations, cannot agree with the Parliament on the implementation of Brexit "no deal". Other options are not on the agenda.
The pound sterling, after the formation of bearish divergence at the CCI indicator, performed a reversal in favor of the US dollar and began a return to the corrective level of 127.2% (1.2180).
What to expect from the currency pair on Tuesday?
Bearish divergence stopped the growth of the pound/dollar pair. A correction level of 127.2% can stop the current fall. The question is whether it will stop? I believe that with the current news coming on the subject of Brexit, it is naive to expect strong growth in the pound. Messages are received from Britain every day and can only be interpreted in favor of the dollar, and it's unambiguous. I recommend that you continue to pay close attention to the news from the UK. The closure of the rate pairs under the correction level of 127.2% increases the probability of further decline towards the next correction level of 161.8% (1.1853).
The Fibo grid is based on the extremes of January 3, 2019, and March 13, 2019.
Forecast for GBP/USD and trading recommendations:
I recommend buying a pair with a target of 1.2437, with a stop-loss level of 1.2180 if a rebound from the correction level of 127.2% is performed.
I recommend selling a pair with the target of 1.1853 and with a stop-loss order above the level of 127.2% if the closing is closed under the level of 1.2180.
