The single European currency says goodbye to the summer in a depressed mood. In the last week of August, it lost about 1% of its value against the US dollar and closed all five out of five trading days in the red zone. Donald Trump managed to stop the fall of US stock indices with words about the resumption of trade negotiations with Beijing, although after an exchange of blows in the form of higher import duties, the situation looked hopeless. The dollar grew not only because of the S&P 500 but also because of the weakness of the main competitors.

The second estimate of Germany's GDP for April-June confirmed the presence of a 0.1% reduction in the indicator, the German business climate from the IFO continues to deteriorate, and inflation has slowed to its lowest level in the last 6 years. Yesterday's locomotive of the eurozone economy becomes its main brake, however, this does not force the Germans to flee to the "dovish" camp from the "hawkish" of the Governing Council. Germany and the Netherlands are the main opponents of the resumption of the quantitative easing program, which could play into the hands of the "bulls" on EUR/USD after the September 12 meeting. However, their opponents have time to develop attacks.

The situation when the chances of the American recession are growing by leaps and bounds and the dollar is strengthening is extremely rare in the market. Something similar took place in 1990-1991 and 2007-2009, after which the USD index went down sharply. However, in the early 2000s, under similar conditions, on the contrary, it strengthened.

The dynamics of the dollar and the probability of a recession in the US economy

The reasons should be sought in the weakness of the main competitors of the US currency, while the fact that the Fed continues to follow the White House's lead restrains the offensive fervor of the "bears" on EUR/USD. According to the former President of the Federal Reserve of New York William Dudley, it indulges the aggressive policy of protectionism of Donald Trump, and in order not to harm the US economy, she should prevent him from becoming the owner of the White House for a second term by raising the rate on federal funds. The opinion of the former FOMC official, very similar to the truth, was quickly hushed up, saying that the Federal Reserve was not politic. However, the situation is unlikely to change in the near future: criticism of the US President will keep the central bank under pressure and contribute to rumors of a weakening of monetary policy. If we add to them the growing risks of currency interventions to weaken the US dollar, the potential for a decline in EUR/USD begins to look limited.

The reluctance of the Bundesbank to face the truth about the technical recession of Germany in the face suggests that the regulator knows something that everyone else does not know. It is possible that the German economy has already hit bottom, and its subsequent improvement will contribute to the recovery of the euro. Moreover, September is a good month for the single European currency: as a result, it strengthened against the US dollar in 27 cases out of 44.

Technically, the targets of 161.8% and 200% for the parent and child patterns AB=CD suggest a convergence zone from which the EUR/USD pair may well turn around. We are talking about the area of 1.089-1.093.