EUR/USD – 1H.
The EUR/USD pair performed a reversal in favor of the European currency on August 20 and resumed the growth process after leaving the upward trend corridor. However, the mood of traders at this time is characterized as "bearish". There was almost no news from the Eurozone during yesterday's session. In America, the situation was slightly better. Negotiations between Democrats and Republicans regarding the size of the new package of financial assistance to the economy are still ongoing. Let me remind you that the party of Donald Trump insists on $ 1 trillion and wants unemployed Americans to return to work as quickly as possible, and not sit at home on unemployment benefits, supplemented by allowances due to the epidemic and crisis, which even before August 1 were $ 600 a week. Republicans, on the other hand, believe that in difficult times of the worst crisis in recent decades, unemployed Americans need to provide all possible assistance and maintain allowances of $ 600, which means that the total package of assistance will exceed $ 3 trillion. According to unofficial information, negotiations are continuing, but there is no official data. Treasury Secretary Steven Mnuchin does not provide new comments on this issue, although he previously said that the package could be agreed in the very near future.
EUR/USD – 4H.
On the 4-hour chart, the EUR/USD pair quotes performed a reversal in favor of the US currency and began the process of falling towards the corrective level of 127.2% (1.1729). At this time, everything looks as if the pair's price drop will continue after a slight pullback up. However, these conclusions are mainly based on the signal on the hourly chart - closing under the trend corridor. In reality, nothing prevents the pair from resuming the growth process. Today, the divergence is not observed in any indicator. The rebound from the Fibo level of 127.2% may work in favor of the EU currency and the resumption of growth.
EUR/USD – Daily.
On the daily chart, the quotes of the EUR/USD pair returned to the corrective level of 261.8% (1.1825) and rebounded from it, which allows traders to expect a resumption of growth in the direction of the Fibo level of 323.6% (1.2084).
EUR/USD – Weekly.
On the weekly chart, the EUR/USD pair performed a consolidation over the "narrowing triangle", which now allows us to count on further growth of the euro currency, which can be very strong and long-term. At the same time, the breakdown may be false. In this case, the drop in quotes will be resumed.
Overview of fundamentals:
On August 20, there were no economic reports in Europe. In America, one, on applications for unemployment benefits. The number of initial applications was 1.1 million, and repeated 14.844 million. The first indicator has exceeded forecasts, and the second was lower.
News calendar for the United States and the European Union:
EU - index of business activity in the manufacturing sector (08:00 GMT).
EU - index of business activity in the service sector (08:00 GMT).
US - index of business activity in the manufacturing sector (13:45 GMT).
US - PMI F=for services (13:45 GMT).
On August 21, the EU and US calendars contain identical reports on business activity in the services and manufacturing sectors.
COT (Commitments of Traders) report:
The latest COT report was very eloquent. Large market players in total (for all groups) closed both long and short contracts during the reporting week. However, we are more interested in the "Non-commercial" group, which actively got rid of sales contracts and increased long. Thus, large speculators continued to favor the euro currency, while not favoring the US dollar. The fact that the euro currency continues to trade near its peaks for many months should not be surprising. The largest traders who enter the market in order to make a profit continue to buy the euro currency. Thus, the COT report allows us to conclude that the mood of large traders has not changed during the reporting week. The growth of the US currency this week will not be reflected in the new COT report, which will be released today.
Forecast for EUR/USD and recommendations for traders:
Today, I recommend buying the euro currency with the goal of 1.2027, since the rebound from the level of 1.1825 on the daily chart was made. I do not recommend selling the pair with the goal of 1.1729 level yet, since there are no new sell signals and they are unlikely to appear today.
Terms:
"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy currency, not for speculative profit, but to ensure current activities or export-import operations.
"Non-reportable positions" - small traders who do not have a significant impact on the price.
