4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -47.7677
The EUR/USD currency pair has finally started a downward movement, which everyone has been waiting for more than a month. At the end of the last trading week, the pair's quotes still performed a more or less noticeable downward movement and overcame the moving average line, which indicates that the trend has changed to a downward one. However, does this mean the formation of a new downward trend? One way or another, it is quite obvious that traders failed to overcome the level of $ 1.19, from which two rebounds followed. So now the bears have gone on the attack, and we just need to find out how the fundamental and macroeconomic backgrounds affected this, and whether they did at all.
The first thing to consider is Friday's macroeconomic statistics. If we do not take into account the secondary report on industrial production in Germany, then all the most interesting reports came from overseas. However, of the three conditionally important reports, one was absolutely insignificant, the second – contradictory, and the third clearly expected more. The first report is average wages in the United States, which rose by 0.2% in July. The second is the unemployment rate, which has fallen to 10.2%, which still remains very high (higher than in the European Union and in the UK). The third is NonFarm Payrolls, which grew by 1.763 million at the end of July with a forecast of +1.6 million. Formally, all three reports were better than the forecast values, so the strengthening of the US currency on Friday is absolutely logical and justified. We can also say that the macroeconomic statistics in the United States are improving, which is also a positive factor for the dollar. However, if six months, a year, or two years ago we regularly wrote that the US economy continues to look stronger and more powerful than the European one, then the coronavirus pandemic has made significant adjustments to the balance of power between the United States and the Alliance. It was America that suffered the greatest losses from the epidemic, lockdown, and crisis. And now it is America that is catching up, even though its absolute GDP remains much higher than the European one. Plus, the epidemic in America is not abating, and in 35 states of the country there are certain restrictions designed to slow down the spread of the "Chinese virus" at least a little. Naturally, this also affects the speed of economic recovery, and also creates risks of a possible second "lockdown". Thus, the optimism of buyers of the US dollar is still local. But we have already said that whatever it is now in America, the US dollar has already fallen quite heavily in the last three months and is now heavily oversold, and the euro is overbought. Thus, we believe that 400-500 points of the euro/dollar pair can easily go down now.
Meanwhile, US President Donald Trump continues to worry only about the problems of his own re-election. The US leader continues to quarrel with everyone he can, while believing that the whole world is against him. This time, Trump managed to fall out with the largest sponsor of the Republican Party, multi-billionaire Sheldon Adelson, accusing him of insufficient funding for his election campaign. Media reports that the US President during a telephone conversation with Adelson said that to win the election, he needs more sponsorship money. It is unknown how Adelson himself reacted to this, but some Republicans now fear that their party's funding will become more scarce. Also, Donald Trump once again "distinguished himself" in exaggerating his importance to the United States. The American leader said that his face should appear on the memorial of the founding fathers of the United States, located on mount Rushmore in South Dakota. We will remind you that the mountain is carved with images of the faces of George Washington, Thomas Jefferson, Theodore Roosevelt and Abraham Lincoln. As we can see, Trump puts himself next to these, of course, outstanding people in American history.
At the same time, Trump continues to cling to any opportunities that are at least theoretically able to increase his political ratings. For example, last week, Trump ordered an extension of the tax holiday for those Americans who receive less than $ 100,000 a year until the end of this year. And he promised to make the tax holidays permanent and to forgive Americans all their tax debts in the event of his re-election as President. It is also reported that Donald Trump ordered that the "coronavirus" allowances for unemployment benefits amounted to $ 400 a week, and the payments of part of this amount will be transferred to the state authorities. Democrats immediately criticized another brilliant plan of Trump, accusing the President of not understanding the gravity of the situation. In principle, the essence of this plan looks very simple – to promise anything to win the election. Trump can now only promise to completely remove all taxes for Americans and hand out money just like that. It is also completely unclear whether Donald Trump has the right to make decisions bypassing Congress on payment issues. Thus, this may just be another unfounded statement by Trump, simply aimed at his own popularization among the electorate before the elections.
However, for the US dollar, this is all irrelevant now. The main thing is that after three absolutely disastrous months, the US currency has finally started to get more expensive. So far, all medium and long-term indicators remain directed upward, but if the price does not return quickly to the area above the moving average this week, they will begin to turn down. On Monday, no important statistics are planned either in the United States or in the European Union, so sellers should not be prevented from continuing to form a new downward trend. At the same time, the pair has not yet gone so far below the moving average to speak about the "strength of the trend". So far, the situation is very shaky and with the slightest pressure from the bulls, the upward trend can resume. Thus, the main thing is that in the coming weeks there will not be a new outbreak of "coronavirus" in the United States, and Donald Trump will not have time to distinguish himself in the international arena with a new conflict.
The volatility of the euro/dollar currency pair as of August 10 is 105 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.1680 and 1.1890. A reversal of the Heiken Ashi indicator upward will signal a round of upward correction within the now downward trend.
Nearest support levels:
S1 – 1.1719
S2 – 1.1597
S3– 1.1475
Nearest resistance levels:
R1 – 1.1841
R2 – 1.1963
Trading recommendations:
The EUR/USD pair may have started a new downward trend, breaking the moving average. Thus, at this time, it is recommended to sell the currency pair with the goals of 1.1719 and 1.1680 before the Heiken Ashi indicator turns upward. It is now recommended to open buy orders no earlier than the pair is re-anchored above the moving average line with the first targets of 1.1841 and 1.1890.