Last week, the US dollar kept all its major competitors under control, which was reflected in strengthening the US currency across a wide range of currencies. The Swiss franc did not agree with this scenario and strengthened against the USD. As for the main currency pair of the Forex market, the single European currency suffered losses against the US dollar, which amounted to 0.46%.
The main event of the past week was the European Central Bank (ECB) decision on rates and the subsequent press conference of ECB President Christine Lagarde. We can not say that the European Central Bank surprised market participants with something. On the contrary, everything went within expectations. Rates remained at their current values. The change in the ECB's monetary policy will depend on the inflationary component and the successful recovery of the eurozone economy from the effects of COVID-19. At least, according to many large commercial banks, it is unlikely to expect any changes in the monetary policy of one of the most powerful and influential world central banks. But at the September meeting, a signal or a decision to reduce the volume of the asset purchase program is not excluded. However, again, this can only happen if the restrictions caused by the COVID19 pandemic continue to be lifted, and economic activity will further increase due to this.
This week, the main event for the entire currency market and the euro/dollar pair will be an extended US Federal Reserve (FRS) meeting on rates. After the decision on rates, updated economic forecasts of the Open Market Committee (FOMC) will be published, followed by a press conference of Fed Chairman Jerome Powell. Most likely, the Fed will not change the parameters of its monetary policy and will leave rates at the current low values. But Jerome Powell's speech may provide an answer regarding the reduction of the quantitative easing program (QE) and inflation and the pace of economic recovery from COVID-19. This event is scheduled for Wednesday, so we will still have time to talk about it. If we touch on the events of today, no macroeconomic reports are planned from the United States. As for the eurozone, data on industrial production for April will be released at 10:00 London time. Now we turn to the price charts, and we will start with the corresponding timeframe.
Weekly
The first thing that catches your eye when looking at this chart is a very similar picture to a reversal. In particular, this is indicated by the three previous highlighted candlesticks. The main point that indicates a high probability of a reversal in the south direction is the inability of the pair to gain a foothold above the important and very strong technical and psychological level of 1.2200. At the same time, we see that the pair rose to both 1.2244 and 1.2266. Well, last week, the euro bulls managed to raise the rate to 1.2217, after which the quote suffered the same fate (namely, the inability to close weekly trading above 1.2200). I believe that now a lot will be decided on whether the bears will be able to push through the level of 1.2100, which acts as sufficiently strong support.
It should be noted that below this level (at 1.2070), there is the red Tenkan line of the Ichimoku indicator. I want to remind you that these lines can provide strong support or resistance to the price. In the current situation, in the case of going below 1.2100, both marked lines can support and return the pair above 1.2100.
Daily
On the daily chart, we see another characteristic signal that indicates the inability of the pair to pass up the 1.2200 mark. We are talking about the candle for June 9, which is circled, and its shape is identical to the reversal model of the candle analysis "Tombstone." I will not deny that this model has an extraordinary power if it appears at the very end of the upward movement. In our case, after the rise to 1.2266. However, in the current situation, it should be considered a signal. The base is still the same — this is the inability of the pair to pass up the level of 1.2200. Friday's rather impressive decline increases the chances of continuing the bearish scenario. However, it is necessary to fulfill several conditions. The primary of which will be a true breakdown of support at 1.2100, and then overcoming the 50 simple and 89 exponential moving averages, which are at 1.2088 and 1.2067, respectively. I recommend you to pay attention that the pair has already fallen and is trading below the Tenkan and Kijun lines of the Ichimoku indicator, which only strengthens the prospects for a further downward scenario.
Trading recommendations for EUR/USD:
Given the consideration of the weekly and daily charts of the main currency pair, the main scenario looks like a downward trend, which means that the main trading recommendation should be considered sales. However, since the pair is trading in the support area, it is very uncomfortable to sell right here and now. I suggest waiting for the EUR/USD rebound to the price zone of 1.2135-1.2160 and consider opening short positions. The confirmation signal for the opening of sales will be the reversal patterns of the candle analysis on smaller time intervals.
