FX.co ★ EUR/USD analysis and forecast for August 23, 2021

At the auction on August 16-20, the US dollar was the undisputed favorite and strengthened across a wide range of currencies. So, concerning the single European currency, the "American" rose by 0.79%, far from the limit. Commodity currencies incurred the largest losses against the US dollar. However, in this article, we will consider the main currency pair of the Forex market. So, the main trigger for the strengthening of the US dollar last week was the minutes of the US Federal Open Market Committee (FOMC), from which it follows that the US Central Bank may begin reducing the purchase of bonds closer to the end of this year. We have already written about this in more detail in previous reviews, so we will not go deeper. In addition, the demand for the US dollar as a safe asset was caused by the concern of market participants about the situation in Afghanistan and the ongoing outbreaks of COVID-19 in different countries of the world, particularly in China. Against this background, investors had concerns about the recovery of the global economy from the negative consequences of the COVID-19 pandemic. Suppose we return to the monetary policy of the Fed and the ECB. In that case, many analytical departments of the largest commercial banks expect the Fed to raise rates for the first time around the middle or near the end of next year, while the ECB will move to tighten much later, not earlier than the end of 2023. Thus, there is a discrepancy in monetary policy between the Fed and the ECB, which will support the US currency. Now it is time to consider price charts, and, given the Friday closing of weekly trading, we will start with the weekly chart.

Weekly

As previously expected, the main struggle for the week's closing price unfolded around the mark of 1.1700. No matter how hard the bulls tried for the euro, they failed to close the trading of the past five days above this important level. It is very characteristic that as a result of a fierce struggle, last week's trading ended at the level of 1.1699. Nevertheless, the last candle was the first to close below 1.1700. Thus, it is still too early to draw unambiguous conclusions about the true breakdown of this mark, in my opinion. A lot will depend on the trading results of the five days that started and on the moods of market participants observed during the current week. If we talk about the goals, then if the pressure continues, the EUR/USD pair risks falling to 1.1622, where the orange 200 exponential moving average passes. For euro bulls, the task seems much more difficult. In addition to the fact that they will need to return trading above the important technical and historical level of 1.1750, it will be necessary to pass up the mark of 1.1800, as well as the red line of the Tenkan of the Ichimoku indicator, which is located at the level of 1.1820. So, judging by the weekly timeframe, there are more chances for continuing the implementation of the downward scenario.

Daily

After the bearish candle for August 19, the closing price of which was 1.1675. The euro bulls started up and tried to correct the situation. However, the corrective rebound on August 20 was mainly due to the closing of trading and profit-taking. Now there is one characteristic and quite an important point from a technical point of view. If the 89 EMA passes on the weekly chart at 1.1734, then the red Tenkan line is located here on the daily chart. Thus, near 1.1734, we can count on a very strong resistance of sellers and prepare for sales. Naturally, this will be possible only if the pair reaches the designated mark. There is no doubt that the players for the increase will still attempt to return the rate above 1.1700, and the pair will circle this landmark level. The main trading recommendation is to look for options for selling EUR/USD after trying to return above 1.1700, 1.1735, and 1.1750. In tomorrow's article on the main currency pair, we will consider smaller time intervals and, if necessary, make adjustments to today's trading recommendations.