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Exchange Rates 09.10.2019 analysis

As seen on the 4-hour chart, the EUR/USD pair tried to perform a reversal in favor of the US dollar near the top line of the downward trend channel. However, the evening speech of Jerome Powell with a delay of almost 12 hours caused the desire of traders to try to close over the channel and change the direction of the trend to "up". We will find out what happens today or tomorrow because the euro/dollar pair is near the upper line of the channel again. Closing the pair's quotes above this line will increase the chances of further growth, but I do not recommend buying the euro before closing above the correction level of 127.2% (1.1024). Today, the divergence is not observed in any indicator.

All the attention of currency traders yesterday was focused on another statement by Fed Chairman Jerome Powell. Not because Powell's performance alone was of great importance, but because there was nothing more to pay attention to. Not a single economic report on Monday, not a single one on Tuesday, and today, too, there will not be a single report relating in any way to the euro or the dollar. Well, the Fed chairman unexpectedly surprised traders with information according to which the program of buying up assets, which was previously known as "quantitative easing," begins. However, Powell himself immediately said that this is not a restart of the QE program. There is a huge difference between the QE and the asset buyback that the Fed is planning now, in the securities that the Fed will "withdraw" in exchange for cash, and for now, according to Powell, the US economy does not need stimulation at all, and the buyback assets will be held under the auspices of expanding reserves.

However, all the same, this decision of the American Central Bank leads to certain thoughts. The fact is that now there is a situation where the actions of the Fed differ slightly from the statements of Jerome Powell, and the statements of Jerome Powell do not correspond to the statements of other members of the monetary committee of the Fed. The Fed has lowered the rate twice and is projected to do so a third time at the next meeting on October 30-31. Now, the Fed is going to buy short-term bills. All this suggests that the US Central Bank is still trying to support the US economy, which may be really in good condition (as Powell says), but show signs of slowing down. Most likely, it is, because about half of the members of the Fed committee making decisions on rates believe that the rate should be reduced further. Also, we all have witnessed a strong decline in business activity indices in America. Powell himself expressed concern because of weak business activity. Thus, most likely, the Fed decided not to wait for the US economy to fall into recession, and begin to support it now.

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

On October 9, traders continue to hold the euro/dollar pair in the key zone – near the upper line of the downward channel and the level of 127.2%. It is in this area that the fate of the pair will be decided shortly. Powell's speech yesterday was not in favor of the US currency, but it did not create much pressure. Today, a new statement of Powell will be held in the evening.

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 selling the pair today with a target of 1.0802 if a new close is made below the level of 1.0918. A stop-loss order above the level of 1.0927.

It will be possible to buy the pair after closing above the downward trend channel and above the correction level of 127.2% with a target of 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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