19.09.201912:18 Ανάλυση και κριτικές Forex: Trading strategy for EUR/USD on September 19th. The Fed cut rates, but Trump still criticized Jerome Powell


Exchange Rates 19.09.2019 analysis

As seen on the 4-hour chart, the EUR/USD pair performed a reversal in favor of the US currency near the upper line of the downward trend channel and returned to the correctional level of 127.2% (1.1024). Thus, traders did not receive a signal to buy, as the bulls did not have enough strength to close over the downward channel. However, there was no closure under the Fibo level of 127.2%. In general, the situation with the euro/dollar pair is confusing. Given that the downward channel continues to hold the pair's quotes within its limits, it still tends to fall. I do not consider buying the EUR/USD pair before closing over the 11th figure. Today, the divergence is not observed in any indicator.

Now, let's get to the fun part. To the results of the Fed meeting, which traders have been waiting for since the beginning of the week. The results of the meeting turned out to be very banal and expected. There were no surprises from Jerome Powell. Thus, a very restrained reaction of traders fully reflects the essence of the information that the markets received yesterday. By and large, Jerome Powell has been torn in recent months, or even a calendar year, into two fronts. On the one hand, US economic indicators and reports show that the country's economy is in very good condition. That is, it does not need an acute weakening of monetary policy. On the other hand, US President Donald Trump continues to not only criticize the Fed and Powell personally, accusing them of not having the courage to admit their mistakes (earlier rate hikes) and even calling them "enemies of the country", he continues to blame the Fed for others countries whose governments have control over their central banks outperform the US. Yesterday, the Fed decided to lower the key rate by 0.25%, but Donald Trump, even in this case, immediately criticized the Central Bank that the rate was lowering too slowly. The US president needs rates comparable to the rates of his competitors, that is, for example, the EU. In the European Union, interest rates of 0% credit (refinancing), and -0.5% deposit. Accordingly, Trump needs zero rates or even lower. But the Fed is not under the control of Trump and probably performs some functions that are unknown to the general public. This may explain the fragmentation of actions and the difference in goals between the US government and the Fed.

Thus, Trump can only criticize the Fed further, and Jerome Powell, meanwhile, reminded Trump in his speech yesterday that the regulator does not obey the president. Powell also said that the Fed took this step (lower rate) to keep the US economy in good shape in the face of certain events and to provide insurance against existing risks. Powell did not say what the events were. The "risks" are probably related to the trade wars that Trump is initiating left and right, and which hamper the global economy.

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

On September 19, I expect the euro/dollar pair to fall in the direction of the corrective level of 161.8% (1.0918 or 1.0927) if there is a new signal to close below the level of 127.2%. The euro had yesterday a chance to grow, as the Fed still eased monetary policy. But traders did not take advantage of the chance. Today, when the news calendar is empty, we can hardly expect a sharp growth of the pair. In any case, before the closing of quotations over the channel, I do not recommend buying EU currencies.

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 a downward trend channel, but it is better to wait until it consolidates above the correction level of 100.0%.

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

Samir Klishi,
Analytical expert
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