25.08.202002:43 Overview of the EUR/USD pair. August 25. The European economy may start to slow down

4-hour timeframe

Exchange Rates 25.08.2020 analysis

Technical details:

Higher linear regression channel: direction - upward.

Lower linear regression channel: direction - upward.

Moving average (20; smoothed) - sideways.

CCI: -89.7316

The EUR/USD currency pair spent the first trading day of the week in an absolutely calm trading, which was to be expected, given the absolutely empty calendar of macroeconomic events. However, during the day, the bears again failed to develop a downward movement, and also failed to develop their local success. Thus, for most of the day, the US currency was again under pressure, and this is what we have repeatedly discussed in our recent articles. Despite the fact that the pair broke out of the side channel of 1.17-1.19, it still can't get a foothold below its lower line. Moreover, there has not been a normal downward correction in the past three months. And even now, when it would seem that the quotes are fixed below the moving average line, sellers have huge difficulties with continuing to move down. As a result, we still believe that the probability of a fall in the US dollar is very high, however, this is based only on technical factors. It is worth remembering that a particular currency becomes more expensive or cheaper solely based on supply and demand for it. Thus, if traders do not start buying the dollar, then whatever the fundamental background or technical factors, the US currency will not grow. This is approximately the picture we are now seeing. For almost a month, the markets have been waiting for the fall of the euro/dollar pair, however, there is no demand for the dollar. Previously, it was absent due to the absolutely failed fundamental background and macroeconomic statistics. Now the situation has become a little better, however, the US currency has not felt any relief. Moreover, the euro continues to get more expensive, without any good reasons for this. In other words, no important and positive information is being received from the European Union at the moment. The latest business activity indices have alerted traders, as it is now possible to expect that the EU economy will begin to slow down in its recovery. Moreover, in France and Spain, a fairly high number of cases of "coronavirus" is again recorded, which again threatens to fall in business and economic activity. Thus, the situation in Europe is now better than in the United States, however, it is beginning to deteriorate.

At the same time, America is fully focused on the upcoming elections, which will be held in two and a half months. Despite the fact that the country barely managed to suppress mass rallies and protests of "Black Lives Matter", despite the record decline in the economy in the second quarter, despite the full-fledged second "wave" of the "coronavirus" epidemic, the talk now in the States is only about the elections. Donald Trump continues to give daily interviews in which he continues to criticize and insult the "corrupt media" that do not appreciate his activities, the Democrats who opposed him even before winning in 2016, separately goes to Joe Biden and Barack Obama. According to Trump, the first has too low IQ and is generally incompetent, the second is the reason that it is Trump who is now President. Also, Trump continues to criticize the idea of voting in elections using mail. "They allow a person to vote several times. Who controls them, whether they are in the districts of Republicans or Democrats? They are not disinfected by COVID-19. Great deception!", - Trump wrote on his Twitter account. And Twitter, in turn, continues to label Trump's messages "as violating the network's rules and misleading". Not so long ago, Kamala Harris, who was nominated for the post of Joe Biden's deputy, also came under criticism of the US President. According to the leader of the American nation, Harris is "nasty and angry, and also commands the least respect among all senators". Joe Biden himself believes that "Trump utters a lot of things that should distract the attention of Americans from his daily duties, which indicates neglect, negligence and harm to the US people, as well as his incompetence".

At the same time, Donald Trump allows a complete break of all ties with China. According to the American President, "China continues to rob America, treat it absolutely unfairly and incorrectly, which may eventually lead to the termination of any business with the Middle Kingdom". "We are losing hundreds of billions of dollars. We don't get anything from China. Yes, we buy some products that we could produce ourselves. But all we do is lose money," Trump said. The President also drew the attention of Americans to the fact that if Biden becomes President, China will take over America.

In general, passions continue to boil in the United States, and everyone seems to have forgotten about the "coronavirus" and that there is still no vaccine against this disease. Donald Trump's "coronavirus briefings" have disappeared again. However, official statistics show that every day in America, 40-50 thousand people are infected. In general, if the situation has improved a little in the United States, it was possible to suppress at least the social crisis and ease the epidemiological crisis a little, then nothing has changed dramatically for the better yet. We still believe that little will change in the country before the elections. Thus, we need to wait for November 3 and carefully monitor events related to the United States, since the European Union is now full of calm news.

As for the technical picture, fixing the quotes of the euro/dollar pair above the moving average will again allow traders to trade for an increase. Both channels of linear regression are still directed upwards, and the price cannot go down more than 200 points. Thus, the pair still has excellent chances of resuming the upward trend, the only "but" - buyers also need good reasons to resume buying the euro near its two-year highs. And these same reasons and grounds are also not present now. Because the situation in the United States is not improving, but it is not getting worse. No important macroeconomic publications are scheduled for Tuesday in the EU and the States. Therefore, all attention is still on Donald Trump and the information flows from overseas.

Exchange Rates 25.08.2020 analysis

The volatility of the euro/dollar currency pair as of August 25 is 97 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.1703 and 1.1897. A reversal of the Heiken Ashi indicator to the top will signal a possible resumption of the upward trend or a new round of upward correction.

Nearest support levels:

S1 – 1.1719

S2 – 1.1597

S3 – 1.1475

Nearest resistance levels:

R1 – 1.1841

R2 – 1.1963

R3 – 1.2085

Trading recommendations:

The EUR/USD pair is trying to continue its downward movement and is located slightly below the moving average. Thus, today it is recommended to open new long positions with targets of 1.1897 and 1.1963, if the pair returns to the area above the moving average line. Since the price still overcame the moving, it is now recommended to trade lower with the goals of 1.1719 and 1.1703. Further downward movement will be possible only after confident overcoming of these goals.

*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 © 2007-2020
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