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Exchange Rates 11.09.2019 analysis

Amplitude of the last 5 days (high-low): 53p - 69p - 68p - 37p - 52p.

Average volatility over the past 5 days: 56p (average).

The European currency slightly fell against the US dollar on the second trading day of the week, September 10. It can be seen that after good progress at the end of last week, bulls need fundamental feed in order to continue to buy the euro/dollar pair. However, the calendar of macroeconomic events in the United States and the EU is absolutely empty in the first three days of the week. Moreover, there was not a single speech by Mario Draghi or Jerome Powell, or even Donald Trump. There was not a single report on the subject of the China-US trade war. Thus, traders in the truest sense of the word have nothing to react to. Moreover, in anticipation of the announcement of the results of the ECB meeting on Thursday, the bulls clearly do not want to risk it. After all, the decision that the European regulator will take can be either "dovish" or "hawkish". In the first case, the ECB will lower the rate on deposits by 0.1% and will not yet announce the resumption of the bond redemption program. In the second, it will lower the deposit rate immediately by 0.2% and announce the start of a monthly bond redemption in the amount, according to analyst agencies, of about 30 billion euros. In both cases, the euro will fall. The euro's only chance is in the hands of forex market traders. Perhaps, in the first option, market participants will decide that such a softening of monetary policy is not enough to lower the euro currency even further. After all, by and large, the euro/dollar continues to trade very close to its two-year lows. Furthermore, traders can recall that the Federal Reserve meeting will soon be held, at which the regulator can lower the key rate for the second time in a row. However, even if the euro somehow manages to miraculously avoid a selloff on Thursday, its prospects are still very vague.

It is gloomy because a trade war with America looms ever more clearly on the horizon. According to many analysts, in mid-November this year, Donald Trump may return to his desire six months ago to impose duties on the products of the engineering industry of the European Union. It is clear that in this case, the demand for the euro will fall even more, and Donald Trump will seek the signing of a trade agreement, which, of course, will be primarily beneficial to the United States and not the European Union. And of course, a trade war with the United States will be more disadvantageous to the European Union than America.

The only chance for the euro in the long run, which, however, is not really needed by the ECB leadership, is a trade war between China and the United States. The fact is that Donald Trump has long insisted that the dollar is too high, and the main enemy of the country is not China, but the Fed, which stubbornly does not want to cut rates, making the dollar less attractive in the foreign exchange market. However, knowing Trump, until his presidency is over, he will continue to push Jerome Powell, the other members of the monetary committee, the Fed as a whole. It is also possible that sooner or later it will achieve a rate cut to such a level when the US dollar will no longer be so attractive for purchases. James Bullard has already announced his readiness to vote for lowering the rate immediately by 0.5%. This is precisely the long-term chance of the euro.

At the moment, the technical picture of the euro suggests the preservation of the upward trend, but it will take a miracle so that the fundamental background this week does not break this trend. Turning the MACD indicator up and overcoming the Senkou Span B line will make it possible to continue moving up with the target of 1.1090.

Trading recommendations:

EUR/USD is adjusting as part of a very volatile upward trend. Thus, it is now recommended to wait until the completion of this correction and buy the euro with the first goal of 1.1090. If the euro/dollar goes below the critical line, then the bears will take over the initiative in the forex market again.

In addition to the technical picture, fundamental data and the time of their release should also be taken into account.

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicator window.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Performed by Paolo Greco,
Analytical expert
InstaForex Group © 2007-2019
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