The Euro bounced above 1.1800 in the end of the last week giving traders a false dawn for the EUR/USD pair could make the downtrend rotation. However, this rally seems to be a huge question mark. Not only does this appear to be practically unreal, but almost impossible.
Nothing threatens the USD with falling and the Euro cannot grow on its own. Whatever they say, the US exceptionalism plays a major role. The leading greenback will be ahead of its major counterparts as long as the US dumps it on purpose.
In the first months of this year there were rumors that the dollar would decline and several analysts exaggerated it predicting a further 20% fall. A lot has changed since then and speculators together with experts quickly changed their mind. The USD bulls are still prevailing, but such big bears as UBS and Goldman Sachs have a skin in the game too. However, it is dubious that it brings them much while the market has a vast volume of open long positions.
A mid-term rotation of the USD index down to the 89,00 level has happened. The greenback is steady and another decline is beyond belief. On the other hand, it is essential to have an alternative scenario in mind. The level of 93,50 plays a major role. If a false breakout occurs we may see another rotation to the low levels and then we will have to find new entry points for long positions.
Since the global situation plays for the USD it is under protection. Additionally, the fact that the Fed is planning to tighten its monetary policy strengthens investors' confidence. Several Fed's officials continue to promote this statement in the media. Recently, President of Federal Reserve Bank of Boston Eric Rosengen said the central bank could be ready to reduce purchasing of assets this fall in spite of the highly contagious Delta variant cases growing.
Further USD direction in a mid-term perspective is attached to the July's meeting minutes publication. Explosive growth could come if traders see a confirmation of what the Fed hawks, who are strengthening in number, were saying. Nobody could tell about the timings, but hawks' behavior and speeches show that the Fed is likely to implement their tapering program at the end of the year.
Nevertheless, these details are not fresh and it is difficult to surprise traders or shape their appetites. Besides, the Fed's meeting in July was held before a publication showing strong data from the US employment market. We could anticipate weak indicators in the minutes revealing slow recovery of this sector; subsequently the document may not introduce the necessity to implement the tapering policy. The minutes will probably contain statements proving the weakness of the employment market, which does not allow the Fed to think about normalizing the monetary policy.
In this connection, Jerome Powell's speech will be crucial for investors in making their decisions today. We have not seen him giving a speech since the publication of impressive data on employment. He was dodging the topic of tapering either. Provided he speaks about it in a more radical way, we may see the demand for risky assets to weaken, which undoubtedly supports the USD rate.
In other words, investors are looking to receive more information from Tuesday's speech about the possible timing of the Fed's asset-buying program winding down.
Today traders are focusing on the publication of data on the euro area. The statistics did not bring any negative nor positive readings. GDP and employment rates grew in accordance with the expectations. However, despite a confident rebound, the sectors' economy remains 3% below its pre-pandemic peaks. At the same time, the economies of such countries as the US and China not only reached growth levels of late 2019, but also exceeded them.
The EUR/USD pair remains under pressure due to the market's ongoing fleeing from risks. The quote continues to shape the lows, trading inside a narrowing triangle according to the technical analysis. Eventually a breakout direction from this pattern may prove to be bearish. In the current situation, the dollar stands strong because of its safe-haven status.
Notably, shaped narrows tend to trigger volatility explosions. The next breakout direction still remains question marks. Surely, it is bearish, but the momentum on the four hour chart is bullish. The entire picture is mixed.
The immediate support is located near 1.1755. Increase of activity from the EUR sellers will push the rate lower to 1.1720 and 1.1700. The round-off level break is likely to confirm a bearish trend, therefore aggressive sales towards the lows 1.1660 and 1.1600 of last year's November are quite possible.
The resistance is located at 1.1805, 1.1825 and 1.1860.
