EUR/USD – 1H.
The EUR/USD pair fell almost to the level of 1.1772 on Wednesday. However, after the results of the Fed meeting became known, the quotes sharply took the course up. Thus, even from the reaction of traders, we can draw an almost unambiguous conclusion: they were not satisfied with the theses voiced by the Fed and Jerome Powell. The pair have secured above the corrective level of 76.4% (1.1837), which allows traders to expect continued growth in the direction of the Fibo level of 61.8% (1.1919). Returning to the topic of the Fed meeting, I can say that the regulator did not make any important decisions. However, few traders count on these very decisions. The performance of Jerome Powell plays a much more significant role. And here, you should carefully study each of his words since there is quite a lot of hidden meaning in them.
First of all, I want to draw your attention to a small change in the wording. Earlier, Powell made it clear in every possible way that the US economy is not yet ready to complete the stimulus, and some sectors of the economy are still very weak. Now the interpretation has changed to "we are watching the economic recovery." In other words, the rhetoric has become a little more "hawkish," but this point should still be seen in Powell's rhetoric. The Fed chairman did not say anything specific on the most important issues. He still believes that inflation will slow down in the future, but he could not say exactly when this should be expected. Also, once again, the phrase was heard that the stimulation of the economy would continue until the employment level returns to its pre-crisis values. We can conclude that the Fed is considering completing the asset repurchase program, but the matter is not going further now. The Fed also made it clear that it is ready to sacrifice inflation to bring the labor market out of the crisis state. Thus, the policy of the Fed and Jerome Powell is clear and understandable. The QE program will be curtailed, but not in the near future. Therefore, the US currency did not receive support.
EUR/USD – 4H.
On the 4-hour chart, the pair's quotes performed a rebound from the corrective level of 76.4% (1.1782), a reversal in favor of the EU currency, and continued the process of growth in the direction of the corrective level of 61.8% (1.1890). The rebound of the pair's exchange rate from this level will allow traders to expect a reversal in favor of the US currency and a slight fall in the direction of 1.1782. Closing quotes above 1.1890 will increase the chances of further growth of the pair in the direction of the corrective level of 50.0% (1.1978).
Overview of fundamentals:
On July 28, there was no single economic report or other events in the European Union. In the US, the results of the two-day Fed meeting were summed up, which forced traders to sell off the dollar yesterday. The information background was strong last night.
News calendar for the United States and the European Union:
US - change in GDP volume for the quarter (12:30 UTC).
US - number of initial applications for unemployment benefits (12:30 UTC).
On July 29, the calendar of economic events in the European Union is again empty. A very important report on the volume of GDP in the second quarter will be released today in the US. The indicator is expected to grow to 8.5%. If traders' expectations are not met, the euro/dollar pair will continue growing.
COT (Commitments of Traders) report:
The latest COT report showed that during the last reporting week, the mood of the "Non-commercial" category of traders again became more "bearish." Major players opened 7,083 short contracts on the euro and closed 5,643 long contracts. Thus, in the last five weeks, the number of short contracts focused on the hands of speculators has increased by 65 thousand, and the number of long contracts has decreased by 5 thousand. Therefore, a further fall in the European currency is very likely. However, over the past week, the euro/dollar pair has not continued falling quotes.
EUR/USD forecast and recommendations for traders:
Today, I recommend buying a pair with a target of 1.1919 on the hourly chart. However, it would help if you were very careful when the GDP report is released. A sharp downward turn is possible. For sale, I recommend waiting for the quotes to rebound from the level of 1.1919 on the hourly chart. The target is 1.1837.
Terms:
"Non-commercial" - large market players: banks, hedge funds, investment funds, private, large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy foreign currency, not for speculative profit, but to ensure current activities or export-import operations.
"Non-reportable positions" are small traders who do not have a significant impact on the price.
