EUR/USD – 4H.
As seen on the 4-hour chart, the EUR/USD pair performed a consolidation above the correction level of 127.2% (1.1029), but the bearish divergence formed a little later at the CCI indicator worked in favor of the US dollar. As a result, the euro/dollar pair slipped back to the Fibo level of 127.2%. The downward trend channel no longer holds the pair's quotes inside itself, thus, the conclusion about the upward mood of traders for the euro/dollar pair arises. However, the information background still does not allow us to choose between currencies unambiguously in favor of the euro currency.
By and large, now several topics are extremely important for the euro/dollar pair. These include China-US trade negotiations, a possible US-EU trade war, and changes in EU and US monetary policies. Each of these topics is important in itself, but this is not the case when each news is reflected in the chart with strong movements. Rather, all these topics create some kind of background for the pair to move in one direction or another. Last Friday, negotiations were held between Donald Trump and Vice Premier of the State Council of the PRC Liu He. According to Trump, the parties have made significant progress in the negotiations in the "first phase." So much so that the contract of this very "first phase" can be concluded shortly, after which the parties will proceed to discuss the "second phase". From the good news for both sides, one can single out the cancellation of the increase in duties from 25% to 30% for goods with a total amount of about $ 250 billion, which was scheduled for October 15. Trump also said that China has already begun to purchase agricultural products in America, following the agreements. All this testifies to the de-escalation of the trade conflict.
This is good news for the US dollar. Not the least role in reducing key US economic indicators was played by the trade war with China. Accordingly, the sooner it is completed, the faster the parties will move towards each other, the faster America's economic performance will return to normal. Well, for the EUR/USD pair, this will mean that the US currency may rush down again, as the demand for the US dollar may rise again. Of course, this is too hasty a conclusion. China and America first need to agree. Further, much will depend on what policy the Fed will adhere to in the event of a trade agreement. If rates no longer drop, this is again a favorable factor for the US currency.
In general, I can say that so far no positive conclusions should be drawn from the next round of negotiations. Tomorrow, Trump may again accuse China of failing to comply with agreements and impose a new portion of duties, as it has been more than once. It will be necessary to rejoice when the parties sign the agreement and announce it. Then it will be possible to consider that Beijing and Washington are on the way to peace and mutual agreement.
What to expect from the euro/dollar currency pair today?
On October 14, traders returned the euro/dollar pair to the correction level of 127.2%. The rebound of quotations from the Fibo level of 127.2% will allow traders to count on the resumption of growth in the direction of the correctional level of 100.0% (1.1106). The report on industrial production in the European Union for August is expected to further worsen the situation. At best, traders will not pay enough attention to it.
The Fibo grid is based on the extremes of May 23, 2019, and June 25, 2019.
Forecast for EUR/USD and trading recommendations:
I recommend selling the pair today with a target of 1.0802 if the close below 1.0918 is executed. A stop-loss order above the level of 1.0927.
It will be possible to buy the pair in case of a rebound from the correction level of 127.2% with the target of 1.1106 and the stop-loss level at 1.1024.
