EUR/USD – 1H.
On August 19, the EUR/USD pair performed a sharp reversal in favor of the US currency and began a strong fall process, securing under the upward trend corridor. Thus, the mood of traders is now characterized as "bearish". Interestingly, the beginning of such a strong fall was not preceded by any fundamental event. In the morning, the European Union released a report on inflation, which turned out to be extremely neutral. Thus, it could not have caused such a strong growth of the US currency. The second event of the day was the "minutes" of the Fed, the minutes of the last meeting of the regulator, however, it came out late in the evening, when the pair had already gone down a decent distance. The essence of the FOMC Protocol also could not provide any support to the US dollar. The document referred to the high uncertainty of the economic outlook due to the coronavirus. Members of the Monetary Committee agreed that the economy will need stronger and more extensive stimulus measures, however, the document does not say exactly what measures the FOMC may apply and when it will happen. "Much will depend on the state's ability to contain the coronavirus, new waves of the epidemic may lead to a longer recovery," the document says. Thus, I believe that this information could not support the demand for the dollar.
EUR/USD – 4H.
On the 4-hour chart, the quotes of the EUR/USD pair also 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 quotes will continue to fall. However, most of these conclusions are based on the signal on the hourly chart - closing under the trend corridor. Today, the divergence is not observed in any indicator. The rebound of the pair's exchange rate 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). The pair's rebound from this level will allow 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.
News overview:
On August 19, Europe released a completely neutral consumer price index with a value of 0.4% y/y, and the evening minutes of the Fed meeting could not cause the dollar to grow. Thus, I tend to believe that news and reports have nothing to do with the growth of the dollar at all.
News calendar for the United States and the European Union:
US - number of initial and repeated applications for unemployment benefits (12:30 GMT).
On August 20, the calendars of the European Union and the United States contain one report for two. If the number of new applications for benefits turns out to be much less than in the previous week, this may provide additional assistance to the US currency.
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 that occurred yesterday and today will not be reflected in the new COT report, which will be released tomorrow.
Forecast for EUR/USD and recommendations for traders:
Today, I recommend buying the euro currency with the goal of 1.2027, if the rebound from the level of 1.1729 or 1.1825 is completed. I recommend selling the pair with the target level of 1.1729, since it was closed under the uptrend corridor on the hourly chart.
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.
