The EUR/USD currency pair continued to trade in the same side channel it had been in for over three weeks on Thursday. Remember that the range for this channel is 1.0132 to 1.0254. In all fairness, we must acknowledge that the pair did not need to leave this passageway yesterday. Although we have repeatedly stated that significant events or macroeconomic reports may not be required to move the price, it is still possible. We also recall that the Fed convened a meeting last week whose results cannot be described as "passing."
Nonetheless, the pair continued to trade within the flat channel. Thus, the only remaining action is to wait. Attend to the conclusion of the situation. As the Nonfarm report, one of the most important reports for the foreign currency market, will be released today, the pair could probably move outside the range given. However, as you are aware, it is far from certain that the pair will not perform another somersault within the channel and ultimately remain in it.
Even the deterioration of the geopolitical situation could not rouse the pair from their lethargy. Yes, the US dollar appreciated Wednesday and Thursday, but what difference would the quotes make if they failed to exit the channel? This channel was established quite near the 20-year lows of the pair, which is a crucial point. In other words, the euro failed to react naturally after reaching its lowest value in twenty years. Consequently, the technical landscape has not changed at all in recent weeks.
The nonfarm report is this week's last hope for a trend.
This week, there were relatively few significant macroeconomic statistics. The Bank of England meeting attracted market participants' attention, and all the most significant publications are set for today. One need only recall the ISM index for the US services sector, which turned out to be stronger than anticipated and prompted a dollar rally, after which the pair continued to trade within the side channel. We want to emphasize immediately that the nonfarm payrolls data is not a panacea. We do not anticipate a necessary market reaction to this information, allowing the pair to depart from its flat position. It will certainly be a significant reaction, but it will occur in the side channel. However, the significance of this information cannot be denied. Now it must demonstrate whether some Fed members, like Jerome Powell, were correct when they referenced the US labor market as evidence that a recession is unthinkable with such signs. If the Nonfarm Employment Change report shows another high result, it will indicate that the Fed is correct and the recession is not yet a threat to the American economy. If Nonfarm Payrolls are weaker than anticipated, the market's long-held view that a recession is inevitable will be validated. In one way or another, robust nonfarm payrolls will support the US dollar. The question is, which aspects of the report can be deemed robust?
Earlier, we repeatedly stated that many traders and experts were captives of their lofty expectations. During the two years of the epidemic, Nonfarm recovered relatively swiftly, as they "collapsed into the Mariana Trench" in March-April 2020. The following figures exceeded the average. However, the market has determined that 500-600 thousand new jobs per month are now the norm. From our perspective, this is not true. The norm is between 200 and 250 thousand. And even the last four months might be positive, with their value of 368 to 398 thousand new jobs. The expected range for the July report is between 250 and 290 thousand. Therefore, a value of at least 250 thousand can be deemed positive. Any value greater than the current one will be exceptional and may significantly strengthen the US dollar. However, unemployment and wage figures will likely receive little attention. Traders have never shown much interest in salaries, and the unemployment rate is at its lowest level in fifty years and is unlikely to move significantly by July's end.
As of August 5, the average volatility of the euro/dollar currency pair for the previous five trading days was 93 points, which is considered "high." Thus, we anticipate the pair to trade between 1.0135 and 1.0320 today. The downward reversal of the Heiken Ashi indicator indicates a continuation of the flat's descent.
Nearest support levels:
S1 – 1.0132
S2 – 1.0010
S3 – 0.9888
Nearest resistance levels:
R1 – 1.0254
R2 – 1.0376
R3 – 1.0498
Trading Recommendations:
The EUR/USD pair attempts to restart its upward trend but drifts sideways instead. Thus, it is now viable to trade on Heiken Ashi reversals between 1.0132 and 1.0254 until the price exits this channel.
Explanations for the figures:
Channels of linear regression – aid in determining the present trend. If both are moving in the same direction, the trend is now strong.
Moving average line (settings 20.0, smoothed) – determines the current short-term trend and trading direction.
Murray levels serve as movement and correction targets.
Volatility levels (red lines) represent the expected price channel that the pair will trade within over the next trading day, based on the current volatility indicators.
The CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal is imminent.
