As usual, we will start the week by summing up the results of the past five days, after which we will try to predict the price movement of EUR/USD at this week's auction. Market sentiment was still mostly focused on the US Federal Reserve System (FRS). First of all, this concerns the timing of the start of the next quantitative easing program, which was dictated by the need in connection with the COVID-19 pandemic. I have repeatedly expressed my personal opinion on this issue - the Fed will not rush to curtail incentives until it is fully convinced of a stable and confident economic recovery.
The Fed's leaders and, in particular, the head of this department, Jerome Powell, give hints and signals that the curtailment of QE may begin at the end of this year. However, in this situation, several extremely important factors should coincide. These are positive macroeconomic indicators: a decrease in coronavirus cases due to a successful vaccination campaign and stabilization of inflationary pressure near the Fed's target level of 2%. Only if these three most important conditions are met, the Federal Reserve will begin to curtail incentives. No market expectations and speculation will change the position of the US Central Bank. As for such monetary men as the president of the Federal Reserve Bank of St. Louis, James Bullard, who suddenly began to show an increased "hawkish" mood that is not characteristic of himself, then, in my opinion, that is why he is not at the helm of the Fed. Now there is no need to hurry at all. As you know, haste is necessary when catching fleas, especially in such a sensitive and highly ambiguous period.
First, the epic with COVID-19 is not yet complete and can present very unpleasant surprises since new strains of the epidemic constantly appear, some of which pose a significant threat. The Delta variant of COVID is perhaps the most vivid confirmation of this. Second, a fairly rapid economic recovery of the world's leading economy cannot yet be considered fully completed or even stable. Here, a clear confirmation is data on the US labor market for August, which turned out to be the weakest in terms of the number of newly created jobs since January of this year. Inflation is also not clear yet, although the Fed leadership considers its jump a temporary factor. COVID-19 has made significant changes in the global economy, and they are by no means positive. Given all of the above, I believe that the Fed will show maximum restraint and patience. Only when it is fully convinced that all three of these factors have coincided together, in a positive sense, will it proceed to tighten monetary policy. The stakes are too high, and the risk of making a mistake now is too high.
Weekly
Well, looking at the weekly timeframe, we are convinced that the trading on September 6-10 was quite sluggish and in a relatively narrow price range. Given that the pair has been trading in the range of 1.1908-1.1664 for about two months, and even in the middle of the Ichimoku indicator cloud, which in itself is an uncertainty zone, there is very little food for thought and development of any technical topic. Nevertheless, for the second week in a row, the quote ended with a decline, and last week's trading still closed a little, but below the red line of the Tenkan of the Ichimoku indicator, which may suggest its breakdown. If so, then the euro/dollar has every chance to continue the downward trend and meet the black 89 exponential moving average, which is conveniently located near the important, strong, and significant historical and technical level of 1.1745. I dare to assume that in the event of a true breakdown of this mark, the euro bulls will expect further and quite serious problems. In the meantime, the price zone of 1.1750-1.1700 represents key support. The nearest and very strong resistance of sellers is near the level of 1.1900. In tomorrow's article on EUR/USD, we will consider smaller time intervals and predict further price movement. As can be seen, it is not yet possible to do this in a weekly timeframe.