The EUR/USD pair is trying to consolidate below the parity level. Looking ahead, it should be noted that this is a rather risky game, given the fact that the dollar is strengthening its positions rather on emotions, on bursts of anti-risk sentiment in the market, as well as on the strengthening of hawkish expectations. Such fundamental factors are a priori transient. Also, the downward dynamics of EUR/USD is due to the weakening of the euro, which is under pressure from the aggravating energy crisis. But the psychological factor also played its role here: September futures for delivery on the Dutch TTF hub yesterday jumped to $3,086 per thousand cubic meters.
Of course, the August downward breakthrough under the parity level is different from the July one. Figuratively speaking, a month ago, the EUR/USD bears carried out reconnaissance in force, undertaking short-term raids in the area of the 99th figure. At that time, the pair's sellers were only able to stay below the 1.0000 mark for a few hours, after which the buyers seized the initiative.
Today the situation is radically different. Traders not only settled within the 99th figure, but also approached its base, clearly intending to test the support level of 0.9900. This suggests that market participants have overcome the psychological barrier associated with a kind of "sacredness" of the notorious parity level. This factor prevented EUR/USD sellers from developing the downward trend in this price area in July: traders were in a hurry to close short positions, opening long positions at the same time.
Nevertheless, the risk of catching the price bottom at the moment is as great as it was a month ago. And the lower the price goes, the riskier the sales look.
In other words, despite the actual overcoming of the psychologically important level of resistance, it is advisable to open short positions on the EUR/USD pair only on the waves of corrective pullbacks. Whereas entering sales, for example, at the bottom of the 99th figure with the expectation of conquering the 98th price level is very adventurous.
Please note that not all dollar pairs of the "major group" have a greenback that demonstrates dominant positions. For example, the USD/CAD pair is declining today, the USD/JPY pair is frozen in place, as is the AUD/USD pair. Even GBP/USD shows some resilience, resisting the onslaught of bears. This suggests that the downward impulse for the EUR/USD pair may fade at any moment, especially after a protracted and almost non-recoiling 4-day downward shaft.
Also, do not forget that the dollar is gaining momentum on the eve of the most important event of this month. We are talking about the Jackson Hole Economic Symposium, in which the heads (representatives) of many Central Banks will speak, including Jerome Powell. As a rule, the speeches of the heads of the Central Bank at this symposium are not formal. It is expected that the head of the Fed will comment on the latest macroeconomic reports (strengthening of the labor market, slowdown in the growth of the consumer price index), assessing the possible pace of tightening of the Fed's monetary policy.
It is likely that the dollar is now the beneficiary of the "buy the rumor, sell the fact" trading principle. Greenback is in high demand amid growing hawkish expectations, especially after the latest speech by Fed Rep. James Bullard (who has the right to vote this year), who returned the issue of a 75-point rate hike to the agenda next month. He said he would support the idea at the September meeting, given the fact that US inflation "remains at a high level." Some other representatives of the Fed (George, Barkin, Daly, Bowman) did not rule out this option either.
If Jerome Powell joins this chorus of hawks on Friday, the dollar will receive additional support. Actually, due to these expectations, the greenback is now keeping afloat, strengthening its position in many pairs. But if contrary to expectations, the head of the Fed voices restrained rhetoric, thereby hinting at the advisability of a 50-point rate hike, the dollar will weaken across the market. In this case, the EUR/USD pair will not be able to hold under the 1.0000 mark—the buyers will have a great opportunity to organize a corrective counteroffensive.
In my opinion, at the moment it is best to take a wait-and-see attitude. Longs in any case look risky, but sales are best viewed at the peak (when fading) of corrective pullbacks. After all, even if Jerome Powell disappoints the dollar bulls, the euro will remain under significant pressure amid the deepening energy crisis in Europe. So, according to many experts, the cost of blue fuel is likely to continue to grow. The upward dynamics is due to a decrease in supplies from the Russian Federation and increased demand for gas against the background of the upcoming heating season and insufficient filling of underground gas storage facilities in Europe. All these factors will push the price up while putting pressure on the single currency. Therefore, it is advisable to open short positions on the EUR/USD pair on corrective bursts. At the moment, entering into sales or purchases is quite risky.
