EUR/USD - 24H.
The EUR/USD currency pair has lost 90 points during the current week. The volatility of the euro/dollar pair has finally increased slightly, which gives hope to traders. In fact, despite the not very large number of fundamental and macroeconomic events during this week, it was quite important. And, as we can see, at the end of the week, the markets came to the same conclusion: volatility increased, trend movement resumed. The only negative is the growth of the dollar, as it slightly violates the technical assumptions that we discussed earlier. However, in any case, we remind you that it is impossible to work out any fundamental theory or forecast without technical confirmation. On the 24-hour timeframe, it is visible that the quotes made an unsuccessful attempt to gain a foothold inside the Ichimoku cloud. In addition, the price bounced for the second time from the 61.8% Fibonacci level. We have received two strong sell signals at once in the last couple of weeks. And these signals are large-scale, as they were formed on a daily timeframe. Therefore, so far, our expectations for the formation of a new upward trend are not justified. However, in any case, you should buy the euro no earlier than overcoming the Ichimoku cloud and preferably the level of 1.1886. At the end of this week, the markets sharply intensified and began to buy the US dollar.
Given that there were few important statistics these days, and the dollar was growing synchronously in pairs with the euro and the pound, the conclusion is that the reason lies in the upcoming Fed meeting, which will be held next week. Given the number of rumors and discussions about the possible curtailment of QE, the markets could at some point believe this, which provoked the growth of the dollar. Moreover, many members of the Fed's monetary committee (and even former FOMC members) have spoken out in recent weeks in favor of curtailing the quantitative stimulus program as soon as possible. Thus, we believe that the reason for the growth of the dollar lies in the expectations of the market.
COT report.
During the last reporting week (September 7 - 13), the EUR/USD pair fell by 60 points. The latest COT report showed minimal changes in the mood of the "Non-commercial" group of traders, the most important group of traders. Professional traders closed 4 thousand contracts and the same number for selling. Thus, the net position has not changed, as well as the mood of the major players. But serious changes followed in the "Commercial" group, where traders immediately closed 27 thousand contracts for purchase and 36 thousand contracts for sale. These data are less important, but still, the difference is striking. Returning to professional traders, the total number of buy contracts they now have is 187.5 thousand, and sell contracts - 160 thousand. Thus, the "bullish" mood persists, but it has weakened significantly in recent months. Therefore, we can say that the euro/dollar pair is currently teetering on the edge of a precipice called a "new downward trend." In principle, we have already said that the critical point for maintaining the long-term upward trend, which began in March 2020, is the level of 1.1700. If the bears manage to overcome it after a 9-month ordeal, then the chances of further strengthening the US currency will increase sharply. Therefore, this issue may be resolved in the coming days. On the other hand, much will depend on the actions of the Fed not only at the next meeting but also in the near future. If the markets do not find evidence of readiness to curtail QE, then the US dollar will lose its trump card in the confrontation with the euro.
This trading week, two macroeconomic reports can be considered important. The States published a report on inflation for August, which slowed to 5.3% y/y, and a report on retail sales, which increased by 0.7% m/m in August, much better than experts' forecasts. But we cannot say that these reports had at least some impact on the US dollar. At least, there were no special movements after their publication. On Thursday and Friday, the dollar grew almost non-stop, without waiting for statistics at all. Thus, these reports could have a certain impact on the mood of traders, but it is unlikely that they would have a strong one. Everything now comes down to the Fed meeting, after which it will be possible to draw long-term conclusions.
Trading plan for the week of September 20-24:
1) On the 24-hour timeframe, the upward trend has not changed since the bulls failed to develop success and overcome the level of 1.1886. Currently, the quotes have fallen below the critical line and the Ichimoku cloud and are moving towards the level of 1.1700 on all pairs. Thus, the pair's sales are more relevant at this time, which could already be opened when the price was fixed below the critical line. If the bears manage to overcome the 17th level, it will be possible to stay in sales with the target of 1.1602.
2) As for the euro/dollar pair purchases, we still believe that the global upward trend can be resumed. But at the same time, there are no technical signals now. At a minimum, you need to wait for a new consolidation of quotes above the Kijun-sen line and only then consider the possibility of buying the pair.
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