Hello, dear colleagues!
Trading on August 3-7 was ambiguous and ended with mixed price dynamics of the main currency pairs. In particular, the main currency pair of the Forex market strengthened slightly, by only 0.08%.
On the last trading day of last week, investors' attention was focused on July data on the US labor market. According to reports from the United States Department of Labor, 1 million 763 thousand new jobs were created in the non-agricultural sector of the American economy last month, while expectations were reduced to 1 million 580 thousand new vacancies. At the same time, it is not superfluous to recall that the previous June figure was a record high and amounted to 4 million 791 thousand. Nevertheless, July's Nonfarm Payrolls exceeded economists' expectations, and this is a positive factor.
Next, you should pay attention to the decrease in unemployment and the growth of average hourly wages. Let me remind you that in July, unemployment in the United States was expected at 10.5%, however, the actual figure was 10.2%. I think that most of all investors were pleased with the growth of wages, which in July was expected to be negative minus 0.5%, and in fact average hourly wages increased by 0.2%.
Despite the fact that the three most important labor indicators were better than the forecast values, it is premature to draw unambiguous conclusions about the imminent recovery of the world's leading economy. In this case, most likely, we can state a gradual and rather slow recovery of the world's leading economy from the consequences of COVID-19. This is exactly the kind of recovery that Fed chief Jerome Powell was talking about. By the way, since we have touched on the topic of coronavirus, since the focus of the pandemic has not yet been localized in the United States, this may negatively affect economic activity in the country, at least in the next 2-3 months.
Another topic that excited the markets was another aggravation of relations between the US and China. Another whim (it is difficult to call it otherwise) of the current American leader was the decree banning transactions with Chinese applications TikTok and the messenger WeChat, which allegedly threaten the national security, economy and foreign policy of the United States. It is worth mentioning that the threat to national security implies nothing more than the permissiveness of the White House administration. Under this sauce, you can make any decisions and carry out various kinds of actions.
The Chinese are shocked by this paranoid decision and are going to defend the legal rights and interests of their companies. Another, to put it mildly, strange decision of Trump was the reintroduction of duties on aluminum from neighboring and friendly Canada. The Maple Leaf country is also perplexed about this and promises to take retaliatory measures. Well, while Donald Trump continues to confidently hold the lead as the main newsmaker and disturber of the world's peace, we will turn our attention to the price charts of the EUR/USD currency pair. As usual, on Monday, we will start with the results of the completed trading week.
Weekly
The candle that appeared at the end of trading on August 3-7 can be considered a reversal model with good reason. Not only did the bulls fail to break through the strong technical level of 1.1900, they even failed to close last week above another significant level of 1.1800. Now, to reanimate the upward scenario, players need to absorb the growth of the last "Rickshaw" candle and close the weekly trading above the past highs shown at 1.1915. Only in this case, growth will gain a second wind and it will be possible to test the strength of the psychological level of 1.1000. Otherwise, there is a high probability of a decline in the price zone of 1.1660-1.1640. Taking into account the reversal model of the "Rickshaw" candle analysis, the most likely decline seems to be a corrective, and maybe even a reversal. It is here that the euro bulls will have to show their true strength and significance of their ambitions to further advance the course in the northern direction.
Daily
And on the daily period, which appeared on August 6, a reversal candle of the Doji variety began to be worked out by the market the next day. Let me remind you that this scenario was predicted in the previous Friday's review of this currency pair, and it was successfully implemented. At the same time, trading on August 7 ended not only at the important level of 1.1800, but also below the Tenkan line of the Ichimoku indicator, which strengthens the further downward prospects for the euro/dollar.
If the bearish scenario continues, the nearest target for sellers will be another landmark level of 1.1700, directly below which the minimum trading values are indicated on August 3. Taking into account the technical picture on both timeframes, the main trading recommendation is sales, which can be considered after the rise of EUR/USD in the price zone of 1.1820-1.1860. If the situation changes, adjustments will be made in subsequent euro/dollar reviews.
Good luck with trading!