The euro/dollar pair has a strong downward movement from the area of the psychological level of 1.2000, where the quote managed to recover by more than two hundred points, which signals a return of the price to the previous borders of the side channel. Such a rapid downward development raises a big question about the ascending channel, the outlines of which have emerged recently (dotted lines on the chart below).
Did the market participants wake up and see how much the US dollar is oversold and the European currency is overbought? Let me remind you that since the end of this spring, the euro has strengthened in value by 11% (more than 1200 points), which is a very significant change in economic realities.
Now, the main question is has the moment of correction come on the market, which has been expected for so long?
There is no need to jump into conclusions, since the market goes on the edge of emotions and everything changes quickly, which is why I write about local operations to be on the pulse with the market every review. If you really want to talk about the correction, then I would pay special attention to the area of 1.1690/1.1710, which reflects the support of the slowdown in July inertia and the recent flat. A breakdown of this area can distribute trading forces, where a transition to a new level, i.e. a corrective move, is not excluded.
Analyzing the last trading day by minute, it was shown that the flow of short positions took place in the market almost throughout the day, which led the quote to the area of the average level of the channel 1.1810.
In terms of daily dynamics, an acceleration is recorded by 24% relative to the average level of 85 ---> 106 points. The high level of volatility has persisted in the market for the fifth day in a row, which suggests exiled speculative leverage.
As discussed in the previous review, the initial correction from the 1.2000 level moved to a new level after the price consolidated below 1.1880. Yesterday's recommendation coincided by 100%, so the profit grew on the trade deposit.
Considering the trading chart in general terms (daily period), it can be seen that the price movement from the psychological level of 1.2000 returned us to the area of the former side channel 1.1700 // 1.1810 // 1.1910.
The news background of the past day contained data on producer prices in Europe, which came out much better than expected. The rate of decline slowed down from -3.7% to -3.3%, with a forecast of only -3.5%. Meanwhile, producer prices in monthly terms rose by 0.6% instead of the forecast of 0.3%.
Data for Europe locally slowed the decline, but only temporarily.
The US ADP published a report on the level of employment in the private sector in the afternoon, which came out worse than expected. So, employment in August increased by 425 thousand instead of the forecast for 1,000 thousand, but we should recall that even the current figure is a kind of historical record in terms of growth. Investors are seeing a recovery, and Friday's Labor Department report could further boost the recovery, which could strengthen the dollar.
In terms of the information background, we have a statement by US Treasury Secretary Steven Mnuchin, in which he noted that more work is needed to recover the economy.
The Finance Minister also said that a second round of large-scale assistance to overcome the economic consequences of the coronavirus crisis is still necessary, despite the fact that the US economy is showing signs of recovery.
In terms of the economic calendar, we have weekly data on unemployment claims in the United States today, where signals of recovery are expected.
Primary applications may decline from 1,006,000 to 950,000 (-56 thousand).
Repeated applications may decline from 14,535,000 to 14,000,000 (-535 thousand).
Further development
Analyzing the current trading chart, we can see that the average area (1.1810) is putting local pressure on short positions, which leads to a pullback in the market. In order for the downward movement to resume, the quote must consolidate below 1.1780/1.1790. In this case, there will be a decline towards the low (1.1754) on August 21. The main point of support is still the area of interaction of trade forces 1.1690/1.1710.
Indicator analysis
Analyzing different sectors of time frames (TF), we see that the indicators of technical instruments on minute intervals signal a buy due to a pullback. On the other hand, hourly and daily periods signal a sell due to a rapid downward trend from the psychological level of 1.2000.
Weekly volatility / Volatility measurement: Month; Quarter; Year
The volatility measurement reflects the average daily fluctuations, calculated per Month/Quarter/Year.
(It was built considering the publication time of the article)
The volatility of the current time is 66 points, which is considered a high indicator for the start of the European session. With the current momentum and speculative hype, it can be assumed that volatility will continue to accelerate.
Key levels
Resistance zones: 1.1910 **; 1.2000 ***; 1.2100 *; 1.2450 **; 1.2550; 1.2825.
Support zones: 1.1800; 1.1650 *; 1.1500; 1.1350; 1.1250 *; 1.1180 **; 1.1080; 1.1000 ***.
* Periodic level
** Range level
*** Psychological level
