The EUR/USD currency pair, following the path of the corrective move from the high of 1.1900 (July 31), still managed to find a pivot in the area of the value of 1.1700, where the variable bumpiness in the range of 1.1700/1.1800 indicated the prevailing upward interest. As a result, the quote still managed to gain a foothold above 1.1800.
The US dollar has been going through hard times on the market for more than a month, and the consecutive loss of positions has led to a change in the medium-term trend. The high rate of change in quotes and the oversold state of the dollar do not affect market participants, but, on the contrary, attract special attention from speculators who support the inertial move.
Whether the current correction will become a future platform for updating the highs will be clear in the very near future. A price consolidation above 1.1800 has already indicated the prevailing upward interest, so it remains a small matter.
Analyzing the past day by the minute, you can see a V-shaped formation of two streams of speculation. The first round of activity began at 9:30 UTC+00 and lasted until the start of the American session, where the flow of short positions brought the quote to the 1.1720 area. The second jump in volatility occurred at 13:30 UTC+00, where the entire path of sellers was played out in a few hours and the V-shaped pattern was closed.
In terms of dynamics, the lowest volatility indicator for five trading days is recorded, 84 points, but this value is 2% higher than the daily average. Speculative mood is evident, and if it goes down by hourly intervals, then the acceleration of volatility has been taking place for more than one week.
Considering the trading chart in general terms (daily period), we can see price fluctuations within the maximum of the year, where, instead of a correction, a pullback of two candles is seen. Sooner or later, the speculative excitement will reach its limit, where the huge oversold US dollar will lead not just to a correction, but to a full-fledged downward rally.
The news background of the past day contained data on producer prices in Europe, where the rate of decline slowed down from -5.0% to -3.7 against the forecast of -4.0%. On a monthly basis, producer prices rose 0.7% against expectations of 0.4% growth. The available data carries a positive background of economic recovery, which affects the European currency, which, although it is in the overbought zone, still receives support from the news stream.
The market's reaction to the statistics was not so surprising; at the time of publication, the market practically did not react to the positive background, but, on the contrary, showed a speculative drain. With the arrival of the Americans, everything returned to its place, an upward surge occurred, restoring the European currency.
In terms of the information background, the heads of the Federal Reserve Bank are increasingly calling on the US Congress for financial support, citing the affected areas of the economy in connection with the coronavirus pandemic.
"A quick end to the support that consumers and businesses are receiving would be quite a traumatic step for what is happening in the economy," said Thomas Barkin, head of the Richmond Fed.
Similar thoughts are expressed by the heads of the FRB: Dallas, St. Louis, Minneapolis and Chicago.
"The ball is at the Congress site. Fiscal policy is fundamental to improving the baseline forecast, for a stronger recovery and lower unemployment, for the safe return of people to work, and ultimately for the safe reopening of schools," Chicago's Fed Governor Charles Evans said.
Let me remind you that the US Congress is considering allocating another $ 1 trillion to support the country's economy.
Today, in terms of the economic calendar, we have data on retail sales in Europe, the rate of decline of which may slow down from -5.1% to -0.5% in annual terms. On a monthly basis, June could bring retail sales growth of 5.9%. Almost at the same time, the final data on the index of business activity in Europe will be published, where a positive growth is expected from 48.3 to 55.1.
As we can see, the statistics are on the side of the Europeans, which means that the euro may receive support and move into strengthening if expectations coincide.
In the afternoon, we have the ADP US Employment Report, which predicts an increase in labor indicators of 1,550,000, but this is not enough to restore employment.
EU 12:00 GMT - Retail Sales (July)
USA 12:30 Universal time - ADP report on the level of employment in the private sector (July)
Further development
Analyzing the current trading chart, you can see that the quote, after a short fluctuation within the level of 1.1800, resumed its upward movement, consolidating above 1.1825. Maintaining the upward mood, paired with speculative interest, may give a new round of upward positions, which in theory, will lead to a renewal of the July 31 high of 1.1900.
It can be assumed that if the price is kept above 1.1830, the quote will move towards the value of 1.1865, after which the movement to the coordinate 1.1900 can already be considered.
An alternative scenario considers the lack of price consolidation above 1.1830, which results in variable bumpiness in the range of 1.1790/1.1830.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on minute and hourly intervals signal a buy by focusing the price above 1.1800. The daily period is still a buy signal, reflecting the full scale of the inertial move.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Measurement of volatility reflects the average daily fluctuation, calculated per Month / Quarter / Year.
(August 5 was built taking into account the time of publication of the article)
The volatility of the current time is 35 points, which is 57% below the daily average.
It can be assumed that due to the information and news flow, speculators will be able to disperse volatility again, eventually exceeding the average.
Key levels
Resistance zones: 1.1900 *; 1.2000 ***; 1.2100 *; 1.2450 **.
Support zones: 1.1800 **; 1.1650 *; 1.1500; 1.1350; 1.1250 *; 1.1.180 **; 1.1080; 1.1000 ***; 1.0850 **; 1.0775 *; 1.0650 (1.0636); 1.0500 ***; 1.0350 **; 1.0000 ***.
* Periodic level
** Range level
*** Psychological level