EUR/USD – 1H.
Greetings, dear colleagues! The EUR/USD pair performed a reversal on Friday and rose to the correction level of 100.0% - 1.1704. Today, it managed to break above this level. So, traders are expecting the pair to reach the level of 1.1772. If the quote falls below 100.0%, it is likely to decline to the level of 1.1629. On Friday, the economic calendar was completely empty. As there were no market-moving events, investors did not expect high volatility. However, today, the situation may change. To start with, during the night trading, the euro continued to grow. Although, usually at night the pair is trading sideways. Additionally, the euro has already fallen noticeably and it is likely to adjust after a sharp drop. Last but not least, today the US and the European Union will unveil several rather important macroeconomic reports, which may affect market sentiment.
Manufacturing and Services PMI indexes are usually not viewed as the most important indicators. However, in recent months, both in the United States and in the European Union, there has been a drastic increase in the number of new coronavirus cases, especially of the new Delta strains. Since the pandemic has a very negative impact on the state of any economy, these PMI indicators may reflect how the economy is dealing with a new surge of diseases. If reports turn out to be weak, it may mean that other economic indicators will also decline. Thus, PMI data will make it clear whether we should expect a slowdown in the recovery of the US and the EU economies. Traders are now more worried about the US economy. The US reports a rise in new cases almost every day despite the high rates of vaccination. In any case, after a few hours, traders will find out all the necessary information.
EUR/USD – 4H.
On the 4H chart, the pair performed a reversal after the formation of a bullish divergence at the MACD indicator. Thus, it may approach the correction level of 76.4% - 1.1782. The rebound of the pair from this level will strengthen the US currency and the pair will resume its fall. A close above 76.4% will increase the likelihood of further growth to the next Fibo level of 61.8% - 1.1890. There are no forming divergences today.
The economic calendar for the US and EU:
EU – Manufacturing PMI Index (08-00 UTC).
EU – Services PMI Index (08-00 UTC).
US – Manufacturing PMI Index (13-45 UTC).
US – Services PMI Index (13-45 UTC).
On August 23, the economic calendar for the European Union and the United States contain the same economic reports. PMI data may cause a strong reaction if it turns out that the indicators fell significantly at the end of August. Alternatively, market participants may ignore this data if PMI indexes do not change noticeably.
COT report (Commitment of Traders)
The latest COT report showed that during the reporting week, the mood of the Non-commercial category of traders became more bullish. Major market players have opened 21,602 long positions on the euro and closed 4,359 short ones. Thus, for the first time in the last 2 months, bulls behaved more aggressively than bears. A further fall in the euro is now not as likely as it was a week earlier. At the moment, euro traders have an advantage as they have opened more Long contracts than Short ones. Thus, the mood of the Non-commercial category of traders, which is the most important, remains bullish.
Outlook for EUR/USD and recommendation:
Today, it is recommended to buy the pair with a target of 1.1772 on the 1H chart since it closed above the level of 1.1704. It is more favorable to open short trades if the pair closes below the level of 1.1704 on the 1H chart with a target of 1.1629.
TERMS:
"Non-commercial" - major market players: banks, hedge funds, investment funds, private, and 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.
