The US currency behaves cautiously and still cannot choose the vector of its movement – the dollar index fluctuates within the range of 92.5-93.4. Dollar pairs followed the dynamics of the greenback yesterday, especially amid an almost empty economic calendar. The market is focused on political events in the US, the prospects for US-China relations and the coronavirus, which investors are starting to worry about again. The information flow is contradictory, so the dollar is actually standing still, despite US President Donald Trump's loud statements and news from the front of the fight against COVID-19. Each case has its own nuances that does not allow you to invest in the dollar without a doubt or, on the contrary, get rid of it. The market is frozen in place in anticipation of powerful information drivers, especially on the eve of a huge event – the Economic Symposium in Jackson hole.
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In the meantime, traders are forced to settle for Trump's political statements and news from the medical front. Yesterday, the Republicans officially nominated Trump for president of the United States at their convention. There was no intrigue here – it became clear in the spring that no one from the Republican party would compete with him in the primaries. Therefore, yesterday's Congress became a mere formality and a PR platform for the head of the White House. Still, some of the statements have put some pressure on the dollar. We are talking about the prospects of US-Chinese relations. Amid rumors that the US and China are holding preliminary consultations on further negotiations, Trump still takes an anti-Chinese position in the public sphere. In particular, he said that if re-elected, he will continue the process of imposing duties on goods from other countries, primarily from China. The day before, Trump made a tougher statement, saying that if he wins the election, he will consider the possibility of "decoupling" the US and Chinese economies. At the same time, he repeated his thesis that the American side "loses hundreds of billions of dollars" and receives nothing from Beijing.
The dollar is sensitive to the Chinese issue, therefore it reacted negatively to such statements. But a little later on, information of the opposite nature appeared on the market. It became known that US Trade Representative Robert Lighthizer and Treasury Secretary Stephen Mnuchin, following a telephone conversation with Vice Premier of the People's Republic of China Liu He, "noted progress in the implementation of the trade agreement." As shown in the official statement of the US Department of Commerce, "both sides see progress, and are determined to take the steps necessary to ensure the success of the agreement." Similar comments were made by the Ministry of Commerce of the PRC. They noted that "the parties agreed to create conditions and atmosphere for the continuation of the implementation of the first stage of the trade and economic agreement." These dry bureaucratic formulations sound much more convincing than Trump's election populism, who once again uses the Chinese theme in his political game. Therefore, the dollar strengthened throughout the market towards the end of the US session, restoring its lost positions.
In addition, the greenback reacted to the news flow in the fight against coronavirus. Yesterday it became known that the US Food and Drug Administration (FDA) authorized (but technically not fully approved) the use of blood plasma with antibodies obtained from patients who recovered from COVID-19. According to the head of the US Department of Health, when using this method, a 35 percent decrease in mortality was noted. He added that plasma treatments have been used successfully for other diseases, including Ebola and diphtheria.
For a long time, the FDA did not give permission for treatment using blood plasma transfusions of patients who had already been ill. In this regard, Trump has repeatedly criticized the department, saying that the FDA "very much complicates the work of pharmaceutical companies." The corresponding permission was received just before the Republican party Congress, so many saw this as a political subtext. Indeed, many scientists are quite cautious about using this method to treat coronavirus: in their opinion, the obtained results are ambiguous, and that there is no evidence that it works in the case of COVID-19. Such comments neutralized the positive effect of the initial news and the dollar hovered in the air again.
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Thus, the fundamental background for the US currency is still contradictory, which explains the flat. This state of affairs is likely to continue until Thursday, when the Economic Symposium in Jackson Hole begins. If we directly talk about the EUR/USD pair, the European currency will react to today's German reports from the IFO. If the indicators repeat the trajectory of the PMI indices, then the pair will come under pressure. An indicator of consumer confidence will be published during the US session, which, as a rule, affects market sentiment only when there are strong fluctuations (or deviations from forecast values). According to preliminary forecasts, the indicator should show positive dynamics (growth to 93.2 points). If the release is in the red zone, dollar bulls will lose another advantage to restore the greenback.
From a technical point of view, the pair is trading within a wide-range flat (1.1720-1.1860), the boundaries of which correspond to the lower line of the Bollinger Bands indicator on the daily chart and the Tenkan-sen line on the same timeframe. With a "smooth" (not impulsive) approach to the upper border of the price range, you can consider short positions to the lower level of the range. And vice versa – you can search for entry points to the 1.1800 mark (the middle line of the BB) and higher from the bottom of the 17th figure.