On Wednesday and Thursday, the EUR/USD currency pair showed nothing regarding movements. For a long time, the quotes of the euro currency were between the Murray levels of "2/8" and "4/8", but last week they managed to get out of this channel. There were hopes for a resumption of the trend, which is now, just a few days after those events, beginning to evaporate. At first, the euro currency fell to the Murray level of "2/8", but at that time, there was nothing surprising in this since if the pair resumed the downward trend, it would have to go through this level. And one bounce from this level in itself does not mean anything. But for two days in a row, the price has been moving with minimal volatility and has not made any attempts to gain a foothold below the level of 1.0132. Formally, the pair is in a downward movement, as it has declined for several days in a row and is located below the moving average. There is now a high probability of resuming the flat between the levels of 1.0132 and 1.0254.
Why is this happening? Traders should not be interested in this particular question. They should be interested in the question, what will happen next? Any event can be explained after the fact. But it is not always possible to predict the further development of events. From our point of view, "technique" is of the greatest importance now, namely the level of 1.0132. With overcoming this level, traders have repeatedly had problems over the past month.Meanwhile, the fundamental background remains the same. And even the minutes of the last Fed meeting the day before yesterday did not change anything.
The Fed's protocol is a pure formality with a "loud" sign.
When traders see an entry in the calendar of events that contains the words "Fed," they often automatically assign the highest degree of significance to this event. However, in the case of the Fed minutes, this is almost always incorrect. To begin with, we recall that the minutes are, by and large, just a document that reflects the essence of the meeting itself, a summary of discussions and decisions are taken. However, we are introduced to all the decisions made by Jerome Powell and companies every time immediately after the Fed meeting, so the minutes are a pure formality. Further, the minutes are released two weeks after the meeting, that is, with a large time delay. Therefore, everything they often say loses its relevance at the time of publication because all this was said two weeks ago. For example, how can the results of the Fed meeting and the inflation report, published two weeks later, be correlated with each other? Even the information that concerns future discussions and decisions may no longer be relevant after the release of several macroeconomic reports.
The latest inflation report showed a decline. The next report, released just a week before the September meeting, can also show a decline, and then what? Will the words of the Fed representatives, who promised to raise the rate aggressively, mean anything if inflation shows a serious slowdown twice? In general, from our point of view, the protocols do not carry any important information, and the market reaction to them is not expected in 95% of cases. And then what remains? What matters then? We have already seen this week that traders are not interested in EU GDP reports. They are also not too much interested in inflation in the EU. Only the interest rates of the ECB and the Fed remain, where everything is consistently bad for the euro currency. Thus, we believe that only the 1.0132 level is currently holding the euro back from a new fall and a new update of 20-year lows. Recall that all this time, while we are discussing rates, inflation and recession, the euro continues to be located only 200-300 points from its 20-year lows. That is, there is no smell of any beginning of a new upward trend. So we have the right to expect the resumption of the global movement of the pair to the south. And even a new ECB rate hike of 0.5% will not save the euro since the Fed will raise the rate by 0.5% minimum.
The average volatility of the euro/dollar currency pair over the last 5 trading days as of August 19 is 82 points and is characterized as "average." Thus, we expect the pair to move today between 1.0032 and 1.0196. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward correction.
Nearest support levels:
S1 – 1.0132
S2 – 1.0071
S3 – 1.0010
Nearest resistance levels:
R1 – 1.0193
R2 – 1.0254
R3 – 1.0315
Trading Recommendations:
The EUR/USD pair continues its downward movement. Thus, it is now possible to stay in short positions with targets of 1.0071 and 1.0032 until the Heiken Ashi indicator turns up. It will be possible to consider long positions after fixing the price above the moving average with targets of 1.0254 and 1.0315.
Explanations of the illustrations:
Linear regression channels – help determine the current trend. If both are directed in the same direction, then the trend is strong.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now.
Murray levels are target levels for movements and corrections.
Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators.
The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.