EUR/USD – 1H.
The EUR/USD pair continued very weak movements on Wednesday. If you look closely at the picture, you can see that all the movements this week occurred between the levels of 1.1704 and 1.1772. Yesterday, on the approach to the level of 100.0% (1.1704), the pair performed a reversal in favor of the European currency and began the process of growth in the direction of the level of 1.1772. However, there was no rebound from 100.0%, and the growth of the euro itself was associated only with the report on American inflation. Thus, inflation in July did not increase compared to June. However, it did not decrease but amounted to 5.4% y/y and 0.5% m/m. Core inflation decreased from 4.5% y/y to 4.3% y/y, and also amounted to 0.3% m/m. Thus, it is possible to distinguish the further impact of rising prices for food and energy carriers in the basic version of the indicator.
Let me remind you that the Fed pays more attention to the basic version of inflation than the general one. However, both options remain very high in any case, as Fed Chairman Jerome Powell has repeatedly stated. According to the Fed president, inflation will begin to slow down by the end of 2021. Therefore, in the coming months, it is hardly worth counting on its strong decline. On the contrary, the acceleration of price growth may continue in the coming months, which may force the Fed to resort to a faster curtailment of the QE program. It is exactly what buyers of the US currency are counting on. It seems that only the early completion of the monetary stimulus of the economy can support the dollar exchange rate in the medium term. In recent months, the US currency has been growing very reluctantly and mainly on important reports indicating a rapid recovery of the US economy and the labor market. Moreover, the statements by the Fed and personally Jerome Powell about the possible start of discussions on the completion of asset purchases in the coming months. The US currency currently has no other support.
EUR/USD – 4H.
On the 4-hour chart, the pair's quotes were secured under the corrective level of 76.4% (1.1782). However, the formation of a bullish divergence in the CCI indicator worked in favor of the EU currency and the beginning of growth in the direction of the corrective level of 76.4% (1.1782). This growth is very weak. However, the US dollar does not have strong support for the information background right now. Therefore, the hourly chart analysis, where there is a level of 1.1704, is more important.
News calendar for the United States and the European Union:
EU - change in the volume of industrial production (09:00 UTC).
US - number of initial and repeated applications for unemployment benefits (12:30 UTC).
On August 12, the European Union will release a report on industrial production for June, and in the United States – the number of applications for unemployment benefits. Both reports are not currently important for traders. Therefore, I would say that the information background will be very weak today.
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 practically did not change. Major players closed 625 short contracts on the euro and closed 3,028 long contracts. Thus, in the last seven weeks, the number of short contracts focused on the hands of speculators has increased by almost 70 thousand, and the number of long contracts has decreased by 14. Therefore, a further fall in the European currency is very likely, according to COT reports. And the past week gives reason to assume that it is the pair's fall that will continue, but at the same time, it won't be easy to close below the area of 1.1730-1.1760.
EUR/USD forecast and recommendations for traders:
Today, I recommend buying a pair with targets of 1.1772 and 1.1837 on the hourly chart if the quotes perform a rebound from the level of 1.1704. I recommend new sales if there is closure under the level of 1.1704 with a target of 1.1606. Or a rebound from the level of 1.1772 with a target of 1.1704.
Terms:
"Non-commercial" - major 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.
