Good day, dear colleagues!
In the absence of significant macroeconomic statistics, yesterday's EUR/USD trading was influenced by events from the US. As it became known, US President Donald Trump signed a number of decrees without the approval of the country's congress. This became possible after the White House administration and congressional Democrats could not agree on increasing the amount of payments to unemployed Americans, who were most affected by the COVID-19 pandemic. Trump personally signed executive orders on fiscal incentives, although under American law, this required the support of Congress. Now the Democrats can challenge the decisions of Donald Trump in court and achieve a positive result, which will be a great help for them in the run-up to the election. Trump, in his characteristic adventurous style, apparently chased the ratings, since he actually canceled the income tax, signing a decree on tax holidays for US citizens whose annual income is less than $ 100,000. The most interesting thing is that about 89% of the country's population falls under this category , and now it is completely unclear how the already inflated budget of the United States will be replenished. Regarding the so-called "coronavirus allowances", they will amount to $ 400 per week. Let me remind you that the Democrats insisted on $ 600, and the Republicans proposed to reduce the surcharge to $ 200. The American President showed unprecedented diplomacy, and in order not to offend anyone, chose the middle of the gold.
Some analysts suggest that the demand for the US dollar, as a safe asset, has increased against the backdrop of strained relations between the US and China. Maybe so. As everyone already knows, Beijing has imposed retaliatory sanctions that have hit eleven US officials.
As for today's economic calendar, it looks more informative compared to yesterday. Whether we like it or not, the trading week is gradually accelerating. So, today at 10:00 (London time), the Eurozone will publish an index of business sentiment from the ZEW Institute. And at 13:30 (London time), a block of statistics on changes in producer prices for July will be received from the United States.
Now briefly about the situation with the spread of COVID-19. The number of people infected with the new type of coronavirus infection in the world has already exceeded 20 million people, of which about half are in three countries: the United States, Brazil and India. In the United States, the daily number of infected people has decreased slightly in recent days. In India, it has increased sharply to 65 thousand diseases per day, and this country has become the leader in the daily increase in infected people.
And in Europe, they fear the invasion of the second wave of COVID-19, and significantly tighten the mask regime. For example, in France, in particular in Paris, you can hardly appear anywhere without a mask — the minimum fine is 135 euros.
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Regarding the strengthening of the US dollar, I would not say that it is related to the signed orders of Trump or the newly appeared demand for the US currency as a safe asset. In my opinion, the oversold "green" and the technical picture are the main arguments in favor of strengthening the dollar.
After yesterday's decline in the EUR/USD currency pair, it is still difficult to determine whether this is a reversal or a corrective pullback. As you can see, yesterday's trading again closed under the Tenkan line of the Ichimoku indicator and slightly below the first pullback level of 23.6 from the growth of 1.167-1.1915. Now the Tenkan line, which runs at 1.1807, may present a strong enough resistance to attempts by the euro bulls to resume the rate rise. Thus, the market is again focused on a strong and significant technical level of 1.1800. The pair's return above this level may signal the end of the corrective pullback. If support is broken in the area of 1.1700, the decline may continue to the area of 1.1585-1.1570, where the Kijun line and the technical level of 1.1570 pass.
Regarding trading recommendations, I am more inclined to sell the pair when trying to return above 1.1800-1.1810. Earlier and aggressive sales can be tried from the price zone of 1.1775-1.1790. At the same time, the target would be in the area of 1.1720-1.1700. If near 1.1700 there are reversal bullish models of candle analysis on the daily, four-hour, or hourly charts, this will be a signal to open long positions with goals in the area of 1.1790-1.1805.
Good luck with trading!
