In my morning forecast, I paid attention to the 0.9953 level and recommended making decisions on entering the market from it. Let's look at the 5-minute chart and figure out what happened there. The data for Germany turned out to be extremely bad, which led to the euro moving down in the first half of the day and to an update of the 0.5593 support. A false breakdown at this level gave an excellent signal to buy the euro, which resulted in an upward movement of the euro by 50 points. From a technical point of view, given the fundamental background in the afternoon, the nearest support and resistance levels were revised.
To open long positions on EURUSD, you need:
It has already been mentioned many times in the speech of the chairman of the Federal Reserve System. The action guide is as follows: if he declares a further aggressive policy and maintains a high rate of interest rate hikes this year, the US dollar will strengthen its position against risky assets – especially against the euro. If the head of the Fed gives at least one hint that the further cycle of rate hikes will be more restrained, demand for risky assets will surely return, and we will see a sharp jump in the euro and a larger recovery. The initial task of buyers during the speech of the head of the Fed will be to protect the nearest support level of 0.9971, where the moving averages are playing on their side. Only the formation of a false breakdown there will signal the opening of long positions in the hope of further growth of the pair with the prospect of updating the resistance of 1.0029. A breakout and a top-down test of this range will hit the bears' stop orders, giving an additional signal to enter long positions with the possibility of a correction to the area of 1.0088. A more distant target will be the resistance level of 1.0127, where I recommend fixing the profits. If EUR/USD declines and there are no buyers at 0.9971 in the afternoon, the pressure on the pair will remain. In this case, the optimal solution for opening long positions will be a false breakdown near the annual minimum of 0.9913. I advise buying EUR/USD immediately for a rebound only from 0.9861, or even lower – in the area of 0.9819 parity with the aim of an upward correction of 30-35 points within a day.
To open short positions on EURUSD, you need:
Do not forget about releasing several fundamental statistics on the United States, except for Powell's speech. Important reports on changes in the level of public spending and the level of income of the US population are expected. Expenses will play an important role to a greater extent, as they may be sharply reduced against the background of the highest inflation rate in the last 40 years. For this reason, bears need to make a lot of effort to protect the nearest level of 1.0029. The optimal scenario for opening short positions will be a false breakout at 1.0029, leading to a sell signal and a repeated euro movement down to 0.9971. A breakdown and consolidation below this range after Powell's speech, as well as, preferably, a reverse test from the bottom up – all this forms an additional sell signal and a larger pair movement to the 0.9913 area, where I recommend taking the profits. A more distant target would be the 0.9861 area. In the event of an upward movement of EUR/USD in the afternoon, as well as the absence of bears at 1.0029, the situation will return to the control of buyers. In this case, I advise you to postpone short positions to 1.0088, but only if a false breakdown is formed there. You can sell EUR/USD immediately on a rebound from the maximum of 1.0127 or even higher – from 1.0155 with the aim of a downward correction of 30–35 points.
The COT report (Commitment of Traders) for August 16 recorded a sharp increase in short and a reduction in long positions, which confirms the current position of the European currency against the US dollar. The risk of an impending recession in the US is now combined with the risk of more serious problems in the eurozone, which will begin this autumn against the background of a sharp rise in energy prices and further inflation, which the European Central Bank is still struggling with at a fairly moderate pace. At the end of this month, a meeting of American politicians will take place in Jackson Hole, where the key word will be for Fed Chairman Jerome Powell. The further direction of the pair will depend on this, as a strong dollar harms the American economy and further accelerates inflation, which the central bank is struggling with. The COT report indicates that long non-commercial positions decreased by 862 to 199,226 while short non-commercial positions jumped by 7,386 to 242,010. At the end of the week, the total non-commercial net position remained negative and decreased to -42,784 against -34,536, which indicates a return of pressure on the euro and a further fall in the trading instrument. The weekly closing price decreased to 1.0191 against 1.0233.