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FX.co ★ EUR/USD. Preview of the new week. Two performances by Jerome Powell. The fundamental background in the US remains the most important factor for the dollar.

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Forex Analysis:::2020-09-20T13:40:04

EUR/USD. Preview of the new week. Two performances by Jerome Powell. The fundamental background in the US remains the most important factor for the dollar.

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Another week in the currency market has ended. Its results are summarized in previous articles, and we just need to figure out what is waiting for traders next week. The euro/dollar pair has been trading between the levels of 1.1700 and 1.1900 for almost two months and has only left the specified range twice during this time. Thus, the new week will have to answer the question again: are market participants ready to finally end the flat and start a new trend? Unfortunately, most of the macroeconomic statistics continue to be ignored by the markets. In principle, from the very beginning of the pandemic and the subsequent crisis in March, we have noted this absolutely illogical behavior of the market. Although it is illogical only at first glance. In the first place in terms of significance, there were simply other factors. It is obvious that in times of a global epidemic, it is the issue of the epidemic that is most important and affects all spheres of life and the economy of any country. Thus, we can draw almost 100% conclusion that the economy of each country now depends on the scale of the coronavirus pandemic. And also on how the authorities of this country are dealing with the pandemic. Therefore, the second most important factor now is politics. Further, when we understand which two factors are most important for the market now, it becomes clear why the US currency has fallen by 13-14 cents against the euro in the last few months. Because there are a huge number of political problems in the United States and one big epidemiological problem, which we have already written about more than once. All this passes through the prism of upcoming elections, mass rallies and protests that recently covered half the country, as well as racial scandals and a possible constitutional crisis. Questions still remain: why is the dollar getting cheaper? More than that! Now, when buyers of the euro currency have been "resting in the Maldives" for the second month, bears (that is, buyers of the US dollar) are not even going to activate. Why? Because there is no reason to buy the US currency (at least in pairs with the euro). At least until the name of the new president of the country becomes known. By the way, do not forget that the United States continues to be involved in the trade conflict with China.

Thus, the overall fundamental background is much more important now. This is especially true for America, as the situation in the European Union is much calmer. The new trading week will start with a speech by Jerome Powell. Recall that last week, the head of the Federal Reserve made a speech dedicated to the next meeting of the Fed. However, there was no special reaction to this event, since the theses voiced by Powell were not extremely important. The US dollar strengthened by 100 points after his speech, however, the same 100 points was lost the next day. Thus, market participants are waiting for important information from Powell, rather than his optimistic exclamations about "higher rates of economic recovery" and forecasts of a rate increase in 2023. Traders are interested in the immediate future. What actions can the Fed take in the coming months? Does the economy need a new stimulus package that is firmly stuck on the sidelines of Congress? What happens if Democrats and Republicans can't agree on it? What is the impact of the "coronavirus" on the economy at this time?

No major events are scheduled for Tuesday in the United States or the European Union. However, on Wednesday, a whole scattering of business activity indices in the services and manufacturing sectors in the EU countries and States will be published. Again, unfortunately, these indices are not important indicators at this time. First, all economies are currently recovering from the lockdown. This explains the high values of business activity in recent months. However, for example, in Spain and France, the second "wave" of the coronavirus pandemic began. Therefore, in the near future, business activity in these countries may begin to fall. The same goes for America. The last two months have been "black" for the States in terms of epidemiology. Therefore, there will probably be no reaction to reports on business activity, but in the long term, these reports will be quite important. The main thing is to understand whether new downturns are beginning in different sectors of the economy of different countries. Recall that any value of business activity below 50.0 signals a downturn. On the same day, Wednesday, September 23, another speech by Jerome Powell is scheduled, this time in Congress. Again, the markets' questions will be very specific. Therefore, Powell's conversations are unlikely to arouse interest and be reflected on the chart of the EUR/USD currency pair.

On Thursday, there will be no important macroeconomic reports either in the States or in the EU. Only data on applications for unemployment benefits in America. Here we are more interested in the indicator of secondary applications, which shows the total number of them and its change. Thus, we can conclude whether unemployment is decreasing in the country. A report on orders for durable goods is scheduled for Friday in the States, which is generally quite important, however, traders have been ignoring it with great pleasure recently.

In addition, we recommend that traders continue to monitor any news and messages from the White House and top US officials. We remind you that it is the general fundamental background from overseas that is of great importance for the US currency. News can be different on the "coronavirus", the vaccine, the elections, the confrontation with China, and so on. And of course, the more negative the news, the more likely it is to resume the fall of the US currency.

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Trading recommendations for the EUR/USD pair:

The technical picture of the EUR/USD pair shows that the price continues to trade in the side channel of $ 1.17 - $ 1.19, which we have already discussed a huge number of times. Only on the 4-hour timeframe, the flat is even more pronounced. The "swing" is visible to the naked eye, and the Ichimoku indicator generates many false signals. Thus, it is not recommended to use Ichimoku in trading right now. The red horizontal lines in the illustration are volatility levels, which also very accurately represent the current range in which trading is taking place. And it is even narrower than the channel of 1.17-1.19. Thus, traders can trade within the specified ranges or wait for the flat to finish. However, it is very difficult to say now when the flat will end.

Analyst InstaForex
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