4-hour timeframe
Amplitude of the last 5 days (high-low): 52p - 29p - 70p - 160p - 54p.
Average volatility over the past 5 days: 73p (average).
The first trading day of the week for the EUR/USD pair remains entirely with the US currency. In the morning, we wrote that correction is the most anticipated scenario on Monday, September 16, in the absence of any macroeconomic information. The only thing we did not expect was that the correction would be so strong. To date, the euro/dollar has already fallen by 82 points with an average value of volatility over the past 5 days - 73 points, but the day has not yet ended. The pound is also getting cheaper, a correction for which was also expected, so the US dollar is now in the lead in the confrontation with European currencies. What does this mean? This suggests that traders brace for the announcement of the Fed meeting's results on Wednesday evening. There is nothing more to do with the strengthening of the US currency with an empty calendar of macroeconomic events. But what does such a strong growth of the US dollar mean? It can mean either the deliberate understatement of the pair for the purpose of further purchases at a more favorable rate or the technical correction of the pair. Each of the options has its pros and cons. Let us dwell on each of them.
The first option can be implemented by speculators with the aim of buying the euro currency before the announcement of the results of the Fed meeting, at which the key rate can be reduced by 0.25%, and possibly immediately by 0.5%. Thus, with a high degree of probability, the US dollar will fall under market pressure on Wednesday, respectively, you need to purchase at the most attractive cost. However, "against" this option is high volatility, the pair will sharply fall. It is unlikely that speculators have so much strength to pull down the pair by almost one cent. Moreover, quotes again approached two-year lows, for updating which 1 point was not enough the last time.
The second option is more likely, from our point of view. Technical correction against a strong upward movement on Friday does not require fundamental reasons, and its size at the moment is exactly 61.8% of the Friday's growth of the pair. Thus, it is possible that from current positions, the EUR/USD pair may start up today or tomorrow, when the meeting of the Federal Reserve, or rather its monetary committee, begins. Since we expect that the pair's growth, based on a possible and probable decrease in the Fed's key rate, will begin much earlier than Wednesday evening, the level of 1.0997 (61.8% Fibonacci) can be considered critical, above which there are still high chances of an upward movement of the pair. Turning the MACD indicator up may signal the opening of long positions. A more powerful signal for an upward trend is the "double bottom" pattern (at the lows of September 3 and 12).
What is the result? As a result, we believe that the pair will rebound from the level of 1.0997 and resume the upward movement. But the duration of this movement is quite difficult to predict. If the Fed unexpectedly for many traders lowers the rate on Wednesday immediately by 50 basis points, then the euro will rise with almost 100% probability. If it is only by 25 base points, then it has a probability of 70-80%. If suddenly the rate remains unchanged, this can provide powerful support for the US currency.
Trading recommendations:
The EUR/USD pair corrected to the Senkou Span B line and can rebound from it and the level of 1.0997. We advise that you resume trading on growth after the completion of the current round of correction, that is, by a rebound from the support indicated above or after the MACD indicator turns up. Goals are resistance levels of 1.1084 and 1.1146.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicator window.
