Market participants, as before, follow the boundaries of the 1.1700/1.1900 side channel, where the US dollar has been under pressure from sales for several consecutive weeks. The situation is interesting because the market ignores technical and fundamental factors, which makes the situation worse and may lead to uncontrolled price changes in the future.
Last trading week ended with statistical data for Europe and the United States, where the second estimate of the euro area's GDP in the second quarter confirmed the acceleration of the economic downturn from -3.1% to -15.0%, which of course is hardly good news. However, the market has long taken into account this unfortunate fact, and put it in the cost of the single European currency as well as other currencies, too. However, all this did not lead to any serious changes in the currency market. First, the data matched expectations. Second, despite the severe economic downturn in Europe, its scale is significantly smaller than in the United States. So the euro clearly looks preferable.
The most interesting event on Friday was the publication of data on retail sales and industrial production in the United States. The growth rate of retail sales sharply slowed down, growth reached 1.2% in July, while expectations were at 1.9%. The June data was revised upwards by 7.5% to 8.4%, but this did not change the situation in any way.
US industrial production was supposed to increase 2.8% in July, but at the same time it accelerated to 3.4%, while the previous data for June was revised from 5.4% to 5.7%.
The dollar continued to lose value with all the data, this time it is justified if we start from the retail sales indicators.
The trading week starts with an empty economic calendar and the nearest activity in terms of statistical data is expected from Wednesday.
From the point of view of technical analysis, the price movement has a looped amplitude, between the borders of 1.1700/1.1900, where the upper part of the channel (1.1800/1.1900) has become the main platform for fluctuations. It is not clear how long the set pace will last, since the euro was predicted to weaken at the beginning of last week, but it did not. Trading within the boundaries of the side channel is still a priority position for traders, which should be adhered to.
Relative to the market dynamics, there is a slight decrease in volatility, which is considered a temporary phenomenon in the market.
It can be assumed that the convergence of the price with the high of August 13, 1.1864, will lead to a local interaction, where you can see the acceleration of activity, and trade to build on the method of a breakout or rebound.
Specifying all of the above into trading signals:
- Long positions, we consider in the case of price taking higher than 1.1870, with the prospect of a move to 1.1900
- Short positions, we consider in the case of price taking lower than 1.1840, with the prospect of a move to 1.1790-1.1720.
From the point of view of a complex indicator analysis, we see that the indicators of technical instruments on minute intervals signal a sale due to a slowdown relative to the curve peak. The hourly intervals are focused on the upward movement in the amplitude of the side channel. The daily period is still signaling a buy from the general direction.