Hello, dear colleagues!
Despite the fact that the main currency pair strengthened by 0.45% at last week's trading, some tasks remained unresolved for the euro bulls. The main one was the breakdown of the sellers' resistance at 1.1915, where the highs of the week before last were shown, and the absorption of the bearish "Rickshaw" candle. A little later, we will take a more in-depth look at some charts of the EUR/USD currency pair, but for now we will talk about the most important events that affected the course of the past week's trading and will be in the focus of market participants during the five-day trading period that has started.
As mentioned in previous euro/dollar reviews, negotiations between the Senate and House of Representatives on the one hand, and the White House administration on the other, have reached an impasse. The parties cannot agree on the adoption of a program of additional incentives for the early recovery of the American economy from the consequences of the COVID-19 epidemic. This factor, of course, does not contribute to the strengthening of the US dollar, as investors fear that the world's leading economy will recover at a slower pace than the rest, in particular, the economy of the Eurozone.
The situation with coronavirus is not as complicated as it was 2-3 months ago. However, in the United States, the number of daily infections, although reduced, is still quite high. In Europe, all is not quiet too. A number of countries are reintroducing restrictive measures, such as Spain, where nightclubs are closing in resort areas and opening hours are being reduced for restaurants and bars. The situation is similar in Italy, where all discos and dancefloors are suspended for 3 weeks. In France, measures to wear protective masks have been seriously tightened, especially in densely populated cities such as Paris and Marseille, which are declared high-risk zones.
If we touch on the topic of macroeconomic statistics, its impact on the course of trading is minimal. Often, macroeconomic indicators are completely ignored by market participants, as was the case with Friday's reports on retail sales in the United States. There won't be many important statistics coming in from Europe and the US this week. However, I would like to draw your attention to the Eurozone consumer price index and the minutes of the last meeting of the US Federal Reserve Open Market Committee (FOMC). Both events are scheduled for August 19, and we will talk about them in more detail directly on the day of release, that is, the day after tomorrow.
Weekly
As already noted at the beginning of the article, despite the growth, the strong resistance of sellers in the area of 1.1900-1.1915 was not even re-tested for a breakdown. Players on the increase simply could not raise the quote to these prices. Highs were shown at 1.1864, and the closing price of previous trades was 1.1841. However, it is premature to assume that the EUR/USD pair has completed an upward trend and a reversal has occurred.
The current five-day trading started with a moderate strengthening of the single European currency against the US dollar and the pair is trading near the strong technical level of 1.1850. The main task for players to increase the exchange rate is still to break the level of 1.1915 and close the week above this mark. If this happens, there will be every reason to expect a further rise to the levels of 1.1945, 1.1960, 1.1980 and 1.1000. Bears need to lower the price below the important strong support level of 1.1700 in order to take control of the EUR/USD trading process. If they succeed, we can expect a further decline to 1.1640 and 1.1600. I would like to draw your attention to the fact that during trading on the euro/dollar, traders take into account the round levels of 1.1900, 1.1800, 1.1700 and 1.1600, so you should pay special attention to the price behavior near these marks.
Daily
On the daily chart, we see that the pair has broken the Tenkan line of the Ichimoku indicator and is moving up towards 1.1900-1.1915. At the moment of completion of this article, the highs of August 13 are rewritten at 1.1864, which strengthens the further upward potential of the quote.
The current situation for opening positions is quite difficult, there is no special desire to buy on the approach to 1.1900 for some reason, but in the case of a decline in the price zone of 1.1830-1.1815, opening long positions, technically, looks quite acceptable, but here we must take into account the probability of an even deeper decline in the price zone of 1.1800-1.1780. I recommend that you take a closer look at the opening of purchases from the two selected zones, but you can try to buy the euro/dollar pair from the current prices more aggressively and riskily.
Despite the fact that buying, in my opinion, is the main trading idea, we can not discount the possibility of successfully selling the pair, if on the approach to the price zone of 1.1880-1.1900, reversal patterns of candle analysis begin to appear on the daily, four-hour or hourly charts. In tomorrow's review of EUR/USD, we will analyze in detail the lower timeframes, and also try to define more clearly the options for opening positions.
Good luck with trading!
