4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - downward.
CCI: -144.9948
The EUR/USD currency pair spent the last trading day of the week in a downward movement. Therefore, we can still assume that the upward trend is complete. However, as we said earlier, the pair's quotes still failed to overcome the previous local lows, which are located near the Murray level of "4/8" - 1.1719. Thus, the pair may again try to go flat between the Murray levels of "6/8" and "4/8", and may resume the upward trend at any time, as the bears still do not show any signs of wanting to start actively selling the pair. Thus, despite the fact that the US dollar has risen slightly in recent days, we cannot draw any important conclusions based on this. The upward trend continues, as evidenced by both channels of linear regression. Fixing quotes below the moving average line only indicates a possible change in the trend, since over the past month the price has overcome the moving three times and each time the upward movement has resumed.
On Friday, August 21, several relatively important macroeconomic reports were published in the European Union and the United States. We are talking about indices of business activity in various sectors of the economy. As it turned out, in Germany, the index of business activity in the manufacturing sector continued to grow and amounted to 53 in August, however, the service sector began to fall – from 55.1 to 50.8. We would like to focus traders' attention on the decline in business activity in the service sector. Does this mean that the most vulnerable area (in the context of the "coronavirus" pandemic) is again beginning to show signs of decline? After all, in France and Spain, outbreaks of "coronavirus" are recorded again. In Germany, from 1 to 2 thousand new cases of the disease are recorded daily. Thus, it is impossible to say that the pandemic was completely overcome in the EU countries. Consequently, people continue to behave cautiously, which is reflected in business and economic activity. Thus, from our point of view, the drop in business activity in the service sector is a bad call. In France, things are even worse. Business activity in the service sector fell to 51.9, and in the manufacturing sector – to 49. In other words, the manufacturing sector has started to shrink again. And how can we not draw a parallel with the same COVID-2019, if on August 21 in France, 15,000 cases of the disease were recorded (according to the Johns Hopkins Institute). This is the second maximum value since the beginning of the pandemic. In fact, in France, we can talk about the second "wave" with confidence, unfortunately. As for the data for the European Union as a whole, all three business activity indices were worse than predicted and worse than previous values. The service sector – a drop from 54.7 to 50.1, the manufacturing sector – a drop from 51.8 to 51.7, the composite index – a drop from 54.9 to 51.6.
In the States, the situation is slightly better, but we remind you that it was the States that became the record holder for the fall in GDP in the second quarter. The index of business activity in the services sector increased from 50 to 54.8, and in the manufacturing sector – from 50.9 to 53.6. In fact, we can even make an assumption that on Friday it was the business activity indices that caused the strengthening of the US currency, since all the European ones failed, and the US ones exceeded forecasts. However, we still believe that macroeconomic statistics have a minimal impact on the mood of traders.
Meanwhile, Donald Trump continues to hint at the desirable postponement of the presidential election and criticizes the vote by mail. As already declared by the President of the United States, Democrats can use the vote by mail in order to falsify the election results. However, Trump does not want the vote to take place by mail. "The results of the elections will not be known, in my opinion, for weeks, months, and perhaps never at all. It may take years to count the votes," the US leader said. "There is a theory that if the result is not established by the end of the year, crazy Nancy Pelosi will become President of the United States. Do you know that?" – added Trump.
In fact, nothing in the States has changed or changed over the past week. Nothing has changed for the better. Democrats and Republicans have not come to a common denominator on the size of the aid package for the American economy. "Coronavirus" has only slightly retreated and the country continues to record 40-50 thousand new diseases every day. Donald Trump continues to worry about future elections and speaks only on the topic of elections and the topic of Democrats. Trump has already forgotten about "coronavirus", "coronavirus" briefings have also disappeared again. Well, it's not worth talking about the economy once again. In fact, the entire country is already in election mode, and now the future will depend on their results. There is also China, relations with which continue to deteriorate, which also does not add confidence to the dollar, and traders – the desire to buy this very dollar. Separately, you can touch on the topic of the COT report (a new one was released on Friday), but it showed minimal changes in the mood of non-profit traders (the most important category of large traders). That is, according to the COT report, it is impossible to conclude that the dollar will now become more expensive.
From a technical point of view, the move of the euro/dollar pair down may end near the Murray level of "4/8" - 1.1719. Approximately from this level earlier, the price bounced several times. Thus, we warn traders that the growth of the US currency may be very short-lived.
On Monday, the calendar of macroeconomic events for the European Union and the United States is empty. Thus, the volatility of the euro/dollar pair may be low.
The volatility of the euro/dollar currency pair as of August 24 is 94 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.1703 and 1.1891. A reversal of the Heiken Ashi indicator to the top will signal a possible resumption of the upward trend or a round of upward correction.
Nearest support levels:
S1 – 1.1719
S2 – 1.1597
S3 – 1.1475
Nearest resistance levels:
R1 – 1.1841
R2 – 1.1963
R3 – 1.2085
Trading recommendations:
The EUR/USD pair has started a downward movement and is located slightly below the moving average. Thus, today it is recommended to open new long positions with targets of 1.1891 and 1.1963, if the pair returns to the area above the moving average line. Since the price still overcame the moving, it is now recommended to trade lower with the goals of 1.1719 and 1.1703. Further downward movement will be possible only after confident overcoming of these goals.
