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Exchange Rates 20.08.2019 analysis

As seen on the 4-hour chart, the EUR/USD pair returned to the correction level of 100.0% (1.1107), rebound from it and turn in favor of the US dollar. As a result, on August 20, the fall of quotations can be continued in the direction of the correction level of 127.2% (1.1025). This fall has been brewing for a long time: bears are constantly attacking the pair, and bulls cannot find reasons and grounds for buying the euro. Now, the bulls showed weakness again and could not take the pair above the level of 1.1107. Although there is a reason for such weakness of buyers – on Monday, the consumer price index for July in the European Union was released, which fell to 1.0% y/y and -0.5% m/m. as we all remember, the ECB set the inflation target of 2.0% y/y. It is clear that with yesterday's inflation report, there is no question of either 2% or stability. It seems that shortly, the European Central Bank will have to turn on the printing press, reduce rates, which will show the weakness of their monetary policy and further dissuade traders from buying the euro. So, it turns out that the maximum of the euro now and in the current conditions is a correction, which from time to time still take place. On Tuesday, the forex market will be content with a zero fundamental background. Nothing interesting for the euro/dollar pair today is reflected in the news calendar. Tomorrow will be the minutes of the last meeting of the Fed. But it will come out late in the evening, so that during the day, again, traders will sit on a "dry ration". Closing the EUR/USD rate above the Fibo level of 100.0% will work in favor of the EU currency and some growth in the direction of the correction level of 76.4% (1.1180). Without this, I do not recommend buying a pair.

The Fibo grid is built on the extremes of May 23, 2019, and June 25, 2019.

Forecast for EUR/USD and trading recommendations:

The EUR/USD pair closed below the correction level of 100.0% (1.1107) and I recommend selling today with the target of 1.1025, with the stop-loss order above the level of 1.1107.

I recommend buying the EUR/USD pair with a target of 1.1180, and with a stop-loss level of 1.1107, if the closing is performed above the correction level of 100.0%.


Exchange Rates 20.08.2019 analysis

Boris Johnson wrote a letter to Donald Tusk with a proposal to revise the mechanism of "backstop", reflected in the current agreement on Brexit, which rejected the British Parliament three times. Johnson stressed that Brexit "No Deal" is not beneficial to anyone and invited the European Union to think again about the revision of the agreement. He also said that the current version of the agreement the Parliament will not accept, mainly because of the desire of the European Union on a tight border with the UK on the island of Ireland. After Brexit, Ireland will remain in the European Union, but Northern Ireland will leave it with the UK. However, according to the 1998 Belfast Agreement, there can be no physical boundaries. Thus, the Belfast Treaty can seriously damage the reputation of the Kingdom of Great Britain, as well as cause riots and protests on the island of Ireland. What will Donald Tusk reply to this letter? Hardly a simple agreement. The chances of new negotiations remain slim. Especially in light of the ticking countdown timer in Boris Johnson's office until October 31. Nevertheless, I want to believe that Brussels and London will still be able to agree on the Northern Ireland border and Brexit "No Deal" will be avoided. By the way, it is in the interests of Johnson himself, who fell out of favor to many political forces in Parliament because of the desire to implement Brexit at any cost. With the release of politicians from the summer holidays, the work of the Parliament will resume and we will know whether the story will develop with the issuance of a vote of confidence to the Prime Minister. If so, then another reshuffle of the prime minister is not ruled out, and in the context of Brexit, this will mean complete chaos.

The pound/dollar is kept strictly under the correction level of 127.2% (1.2180), rebounded from it. Thus, the drop of the quotes may be resumed towards the Fibonacci level of 161.8% (1.1853). Closing the GBP/USD pair above the correction level of 127.2% will allow traders to expect some growth in the direction of the correction level of 100.0% (1.2437), but the chances of reaching this level are extremely small now.

The Fibo grid is built on the extremes of January 3, 2019, and March 13, 2019.

Forecast for GBP/USD and trading recommendations:

The GBP/USD pair may resume the process of falling. Thus, I recommend selling the pair with the target of 1.1853, with the stop-loss order above the level of 1.2180, as the rebound from the Fibo level of 127.2% was performed.

I recommend buying the pair with the target of 1.2437 and with the stop-loss order below the level of 127.2% if the closure is performed above the level of 1.2180.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Performed by Samir Klishi,
Analytical expert
InstaForex Group © 2007-2019
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