EUR/USD - 24H.
The EUR/USD currency pair has slid down by another 90 points during the current week. There are simply no buyers of the European currency on the market right now, so even when a pair is given a great chance to start forming an upward trend, it does not use it. Recall that we have long been waiting for the beginning of the formation of an upward trend on the 4-hour timeframe, which will be part of the global trend on the 24-hour one. However, in the last six months, the pair has not been able to break through its three-year highs in any way. In the previous two months, traders have been very sluggish but still selling off the pair, which leads to a strengthening of the US dollar. Currently, the quotes are located near the 17th level, which we identified as the target for the current decline.
As you can see, the price could not go far below this level, but it also cannot start a new movement to the north. Among the important factors that can now influence the pair's exchange rate, we highlight the growing probability of curtailing the Fed's quantitative stimulus program in the near future. Or at least a clear answer from the Fed, when we should expect a decrease in the volume of money injection into the economy. We believe that this factor allows the dollar to strengthen in a situation when it should have started a new round of decline for a long time. However, the faith of the markets is not infinite. Next week, all attention will be focused on Jerome Powell, who will have to answer this question as part of the symposium at Jackson Hole. And already in September, a new meeting of the Fed will be held, from which many experts are waiting for a specific announcement about the curtailment of QE. If these two events come true, then the US dollar may add a little more. However, we remind you that the Fed continues to pour hundreds of billions of dollars into the economy, so the dollar remains at risk.
COT report.
During the last reporting week (August 10-16), the EUR/USD pair increased by 40 points. Since, in general, the European currency has been falling in recent weeks, it is not surprising that COT reports show a weakening of the "bullish" mood among professional traders. It is visible on the first indicator, which shows a weakening of the "bullish" mood since February. The green and red lines are narrowing, which indicates the end of the upward trend. However, the upward trend cannot be considered complete yet, and the latest COT report allowed the green line (the net position of the "Non-commercial" group of traders) to increase. The bullish mood among the major players is strengthening again, so a new upward trend may begin in the near future. The second indicator also signals an increase in the net position. It clearly shows that the volume has increased, and the probability of a new strengthening of the euro increases accordingly. During the reporting week, professional traders opened 21.6 thousand buy contracts and closed 4.4 thousand sell contracts. Thus, the net position immediately increased by 26 thousand, which is a lot even for the euro. However, as we can see, the euro resumed its decline in the next few days, so the new COT report may already show a decrease in the net position. In any case, the "bullish" mood remains since the total number of open contracts for purchasing "Non-commercial" exceeds the total number of contracts for sale. Therefore, we continue to expect the resumption of the upward trend.
The current trading week was very calm regarding movements, although there were plenty of macroeconomic statistics. However, in half of the cases, it simply did not impress (the forecast and the actual value coincided), and in the second half, it was ignored by traders. For example, an important report on retail sales in the United States was released on Tuesday, which turned out to be significantly worse than forecasts. However, it was on Tuesday that the dollar rose by 70 points. The market's reaction was not entirely clear on Wednesday when the Fed's minutes on the last meeting were published. These documents are very rarely reflected on the movement chart, but this time the markets first rushed to sell the dollar, and after 10 minutes, they were already actively buying it. However, the document itself again did not contain any fundamentally new information. On Thursday and Friday, everything was much easier since there were no interesting statistics and news at all.
Trading plan for the week of August 23-27:
1) In the 24-hour timeframe, the trend remains downward, and traders have made a second unsuccessful attempt to overcome the level of 1.1700, so the downward movement can be completed. However, as long as the price is below the critical line, the downward trend remains relevant, and short positions should be preferred in trading.
2) The euro/dollar pair has crept up to the level of 1.1700 and can continue a sluggish decline with a favorable fundamental background for the dollar. We remind you that the volatility remains very weak. Since the bulls cannot seize the initiative in any way, we assume a decline in quotes in the near future up to the level of 1.1600. But, as we have already said, in any case, as long as the downward trend persists, you should trade down without trying to guess the upward reversal.
Explanations to the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced earlier.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
