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Exchange Rates 20.09.2019 analysis

As seen on the 4-hour chart, the EUR/USD pair performed a rebound from the correction level of 127.2% (1.1024) and a new reversal in favor of the European currency. At the end of the trading day, the euro/dollar pair found itself near the upper line of the downward trend channel, near which it had recently spent a sufficient amount of time. I believe that such a long lull on the part of the bears suggests that the downward trend will end here. Of course, there are a lot of other possible scenarios, but today, September 20, the pair can perform a consolidation over the downward channel, which will allow traders to count on fairly strong growth shortly. Now, I do not recommend considering the pair's sales until the close under the Fibo level of 127.2%.

From my point of view, several global factors can return bears to the market or, on the contrary, completely expel them from it. As we can see, the two meetings, the ECB and the Fed, did not particularly clarify the picture of the euro/dollar pair. Both central banks lowered key rates. "And what's next?", traders ask. Jerome Powell did not answer this question, and Mario Draghi is going to resign. Mr. Draghi has only one meeting of the regulator, in October, to once again weaken the monetary policy of the European Union. Further, the reins of power will be taken over by Christine Lagarde, who previously held the post of head of the IMF. But even without the change of leadership of the ECB, it is clear that the regulator will continue to reduce rates and stimulate the economy of the union by buying bonds and saturating the market with the money supply. The main question is how quickly the Fed will lower its key rate. Now, traders continue to be a little skeptical about easing the Fed's monetary policy, as they understand that this is not a necessary measure, as in the European Union, but rather the satisfaction of Donald Trump's convincing "requests". It is the US President who is "hindered" by the expensive dollar. It is Trump who believes that rates should be reduced to zero. It is Trump who leads trade battles and craves a depreciation of the US currency against the currencies of his trading opponents. Thus, the US dollar will become cheaper if the Fed reduces the rate at each meeting. Now, traders are thinking and are no longer eager to buy the American currency with all their might. With each new Fed key rate cut, there will be more doubts.

The second factor is America's trade wars, or rather, a possible trade war with the European Union. According to many experts, Trump will not get involved in a second trade war until he finishes first, with China. It is very difficult to fight on two fronts. However, such a scenario cannot be completely ruled out. And I believe that the second trade war will harm the dollar again through the Fed rate, which the regulator will be forced to reduce faster.

What to expect today from the euro/dollar currency pair?

On September 20, I expect the euro/dollar pair to either close over the downward channel, which has been brewing for a long time. In this case, the growth of quotations can be continued towards the correction level of 100.0% (1.1106), from which the pair previously performed a rebound. In the second case – rebound from the channel line, followed by a fall to the correction level of 127.2% (1.1024).

The Fibo grid is based on the extremes of May 23, 2019, and June 25, 2019.

Forecast for EUR/USD and trading recommendations:

I recommend today to sell the pair with the target of 1.0927 if a new consolidation is performed under the level of 1.1024. A stop-loss order above the level of 1.1029.

It will be possible to buy a pair after closing above the downward trend channel, but it is better to wait until it also consolidates above the correction level of 100.0% (1.1106).

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

Performed by Samir Klishi,
Analytical expert
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