4-hour timeframe
Technical data:
The upper channel of linear regression: direction – down.
The lower channel of linear regression: direction – down.
The moving average (20; smoothed) – sideways.
CCI: 60.1329
Last night, we wrote that the Fibonacci level of 61.8% (1.0997) is extremely important to determine the future dynamics of the EUR/USD pair. We also noted that a strong "double bottom" pattern is also important. Based on these two technical factors that speak in favor of the formation of an upward trend, we concluded the almost inevitable strengthening of the euro in the coming days. However, we expected that the growth of the euro will coincide with the announcement of the results of the Fed meeting, which is highly likely to be decided to reduce the key rate by 0.25%. Or at least, it starts 8-10 hours before Jerome Powell's press conference. In practice, as often happens, it turned out a little differently. The growth of the euro began, but it began on the night of September 18, in the Asian trading session. As a result, the euro/dollar pair consolidated above the moving average line again, changing the current trend to an upward one.
Now let's go through the fundamental events of today. The first event will be the publication of the inflation report in the European Union. According to experts' forecasts, the consumer price index in August will not change and will be 1.0% y/y. The base consumer price index is expected to be at 0.9% y/y. Is it worth saying once again that these are very weak inflation indicators and it is because of this that the ECB is forced to turn on the printing press, flood the economy with cash, buy bonds, and reduce the already "ultra-low" rates? The main thing for the euro is that inflation does not slow down even more. Because if that happens, the single currency may come under pressure again from traders today. And the current technical picture does not suggest this.
The key event of the day – the announcement of the results of the meeting of the Federal Reserve System – is scheduled for late evening. As we said, strong movements in the forex market can begin a few hours before this event. Traders expect the Fed to cut rates by either 0.25% or 0.50%. Any other development of events will be perceived by traders as a surprise. In the first case, the fall of the US dollar may not be too strong, in the second – strong. Also of great importance will be the speech and rhetoric of Jerome Powell, the Fed Chairman. If Powell reports openly or hints at future rate cuts, market participants will understand that Donald Trump has achieved his goal anyway and now rates will be reduced to 0.0%, so that the country is stronger in trade and currency wars with China and the European Union. If nothing of the kind is heard at Powell's speech, the conclusion will be the following: the Fed will react to macroeconomic indicators and change monetary policy depending on their changes.
Nearest support levels:
S1 – 1.1047
S2 – 1.1017
S3 – 1.0986
Nearest resistance levels:
R1 – 1.1078
R2 – 1.1108
R3 – 1.1139
Trading recommendations:
The euro/dollar pair has fixed back above the moving average, so now it is recommended to re-consider buy orders with targets of 1.1078 and 1.1108, before the reversal of the Heiken Ashi indicator down. During the evening announcement of the results of the Fed, it is recommended to be more cautious in working on the forex market, since in any case, unexpected and strong movements of the pair are possible.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of illustrations:
The upper linear regression channel – the blue line of the unidirectional movement.
The lower linear regression channel – the purple line of the unidirectional movement.
CCI – the blue line in the indicator window.
The moving average (20; smoothed) – the blue line on the price chart.
Support and resistance – red horizontal lines.
Heiken Ashi – an indicator that colors bars in blue or purple.
