EUR/USD - 24H.
The EUR/USD currency pair has increased by 100 points during the current week. Thus, the pair may be again trying to start a new upward trend. Recall that we have been expecting a new round of upward movement for at least several weeks. Our expectations are based on an analysis of all global and local factors. And this analysis still speaks in favor of the fall of the US currency. We also recall that there was just a round of correction against the upward trend in the last few months from a global technical point of view. The second round of corrections in the last six months. Thus, once this movement is identified on the 24-hour timeframe as a correction, therefore, the upward trend persists and will be resumed. We also said that the target for the second round of correction might be the level of 1.1700. At the moment, it is near this level that the downward movement has ended. Thus, we still believe that there is a high probability of a resumption of the upward trend. Especially because the Fed continues to pour hundreds of billions of dollars into the American economy, and Jerome Powell still does not name any deadlines for completing the quantitative stimulus program.
Moreover, the States are currently facing a full-scale new "wave" of diseases, so the Fed fears a possible slowdown in the pace of economic recovery. In general, the situation is as follows: if the price is fixed above the critical line (so far, this consolidation is not too confident), then almost all factors will speak in favor of a new upward trend. Otherwise, the downward movement (most likely, very weak) may continue for some time.
COT report.
During the last reporting week (August 17-23), the EUR/USD pair fell by 30 points. Thus, judging by the chart of the European currency, the "bearish" mood among traders remains. However, both indicators in the illustration above indicate that the bullish mood among the major players remains, which is indirectly another factor that speaks in favor of resuming the upward trend for the euro/dollar pair. The "Non-commercial" group of traders, which is the most important, still has more contracts open for buying than selling. This value has been declining recently, but it remains "bullish." During the reporting week, the mood of professional players again became more "bearish." The Non-commercial Group has closed almost 40 thousand buy contracts and only 7.2 thousand sell contracts. Thus, the net position decreased by 33 thousand at once. It indicates that the process of selling off the European currency continues. However, we knew this and judging simply by the chart of the euro/dollar currency pair. We believe that the non-overcoming of the level of 1.1700 preserves the scenario with a new upward trend, no matter how much the net position of non-commercial traders decreases. Because the "technique" in this case eloquently indicates a very likely resumption of the upward movement. But if the level of 1.1700 is overcome, large players may feel that it is no longer just a correction but a new downward trend and continue to increase short positions. Therefore, in some way, the euro/dollar pair is now at a very important point, both price and time.
The current trading week was highly boring in terms of macroeconomic statistics and fundamental events. Several more or less interesting reports were published during the week, but what is the use of them if the markets took a wait-and-see position from the very beginning of the week and refused to trade. And they were waiting for Jerome Powell's speech at the symposium in Jackson Hole, which was supposed to take place on Friday. It took place, but the traders' hopes were not destined to come true since the head of the Fed did not tell the markets anything new. We have been writing in our articles all week that the probability of receiving new information from Powell is extremely low, given the circumstances that have developed in recent weeks. However, the markets still seemed to be waiting for Powell to announce the timing of the completion of the QE program, or at least hint when this should be expected. But no. Nothing like this happened, so the US currency fell in price on Friday by 44 points. And under the circumstances, this is not the worst value of volatility.
Trading plan for the week of August 30-September 3:
1) On the 24-hour timeframe, the trend remains downward, but traders have made a second unsuccessful attempt to overcome the level of 1.1700, and at the same time, they will now try to overcome the critical Kijun-sen line. However, as long as the price is below the critical line, the downward trend remains relevant, and short positions should be preferred in trading.
2) The euro/dollar pair returned to the Kijun-sen line this week, but now it will take a confident overcoming to count on the upward movement that we talked about in the article. Therefore, if this happens, we can expect the further movement to the north with a target of 1.1886 (the last local maximum).
Explanations to the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced earlier.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
The material has been provided by InstaForex Company - www.instaforex.com