On Friday, the euro/dollar pair opened up new price horizons, breaking through the psychologically important support level of 1.1000. Although this price movement was impulsive against the background of profit-taking at the end of the week and month and "thanks to" massive triggering of stops, the pair is in no hurry to return to their previous positions. The EUR/USD pair showed modest corrective growth but still remained within the ninth figure. The pair has not been at such marks since May 2017 then the price was within the uptrend, recovering after reaching the multi-year low of 1.0350.
At the moment, the downward trend dominates and the pair has the potential to further decline at least to the first, most powerful support level of 1.0750, which was the lower line of the Bollinger Bands indicator on the monthly chart. However, the pair may return to the previous price range of 1.1090-1.1210 but only due to the weakness of the dollar. The common currency is under pressure from a negative fundamental background, concerning the latest macroeconomic releases and dovish comments by Christine Lagarde put strong pressure on the euro. Hence, the EUR/USD bulls should focus only on American events in the context of a possible corrective price recovery.
That is why Nonpharma will become the central event of the current week. Key data on the labor market after the comments by Fed Chairman Jerome Powell, who will speak at an economic forum in Switzerland, will determine the movement of the American currency. All other releases will have a secondary and more likely "supportive" role. According to preliminary forecasts, data on the labor market will again support the US currency but the optimism of traders may be restrained due to weak growth in the level of wages. Thus, the unemployment rate should remain at a minimum level of 3.7% with a sufficiently significant increase in the number of employees by +160 thousand. But here, a separate line is worth noting the growth rate of the average hourly wage. Experts expect the indicator to slow down in annual terms and should fall to a three percent mark (after reaching 3.2%). If the stated figures are confirmed, the dollar will receive some support, but at the same time, a weak increase in salaries can smear the overall positive outlook.
If the release comes out in the "red zone" as a whole, then the US currency will again be in limbo as talks will return to the market that the Fed will not be limited to one round of rate cuts before the end of the year. The published figures will be able to quickly comment on the head of the Fed Jerome Powell. After the release (15:30 UTC), he will deliver a speech "Economic Perspectives and Monetary Policy" at the University of Zurich. It is worth noting here that after the July rate cut, he said that he did not consider the decision of the US Central Bank as the beginning of a long cycle of reducing the cost of borrowed funds. If in the light of recent events he changes his mind, then the dollar will be under quite powerful pressure. Also, it is worth noting that Powell could take a "dovish" position against the backdrop of excellent Nonpharms (focusing on the conflict between the US and China). Therefore, do not rush to open trading positions immediately after the release of data on the growth of the American labor market. In this case, it is advisable to wait for the comments of the head of the Fed.
As I said above, other publications of a macroeconomic nature will play a secondary role for the EUR/USD pair. Today, the economic calendar is practically empty as the United States celebrates Labor Day, so the country's trading floors will be closed (as in Canada). During the European session on Monday, the final estimates of the manufacturing PMI indices of Germany, France, Italy, and the entire eurozone will be published. According to the forecast, the final assessment of these indices will coincide with the preliminary value, so these releases are unlikely to have any effect on the pair.
On Tuesday, traders should pay attention to the American manufacturing index ISM. Over the past four months, it gradually slides down, reaching 51.2 in July. According to most experts, the indicator in August will remain at its previous values. For dollar bulls, it is important that this indicator does not cross the 50-point value. This requirement is also true for the composite ISM index for the non-manufacturing sector. It also gradually decreases. If in May the index was at the level of 56 points, then it was already around 53.7 in July. According to the general forecast, the indicator in August will have a minimal recovery up to 54 points.
Also this week, several Fed representatives are expected to speak. Ten days before the meeting, members of the US regulator must abide by the "silence regime", but up to this point, many of them will comment on the current situation. Hence, on Wednesday, John Williams, James Bullard, Charles Evans, Michelle Bowman and Neil Cascari will speak and on Friday, Jerome Powell will have a speech, as mentioned above. He will put an end to this series of speeches ahead of the September meeting of the Federal Reserve.
Thus, the euro/dollar pair will be waiting for key Friday data this week, while tracking the dynamics of US-Chinese trade relations. An increase in anti-risk sentiment can also be triggered by British events as the House of Commons will begin its work on September 3. If MPs are unable to dismiss Johnson and/or form an interim government, the euro will come under strong pressure, fueling interest in the sales of the EUR/USD pair. The impact of macroeconomic releases against this background will have a limited impact. In general, now the question is as follows: either the bulls of the pair will be able to "pull out" the price above the 10th figure in the range of 1.1090-1.1210 at the end of the week, or the downward trend will continue, which reduces the price to the middle of the seventh figure.
The material has been provided by InstaForex Company - www.instaforex.com