4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 33.3612
For the EUR/USD pair, the third trading day of the week was calm again. Market participants do not yet find reasons for more active trading. Maybe because they do not see any grounds for it or maybe because they are afraid of buying the euro currency at such high levels. We deliberately do not talk about the reasons for market participants' refusal to buy the US currency, since there are still few fundamental reasons for such a strategy. Thus, yesterday, the pair's quotes worked out the moving average line and rebounded from it, trying to resume the downward movement. However, "resume the downward movement" is a very loud word. Still, in the last three months, during which the euro has grown by 12 cents, the US dollar has not been able to adjust by more than 2 cents, which is very little. Taking into account the fact that the last week did not update local highs, that is, the upward trend was put on pause, during this time the pair again went down no more than 200 points. Thus, we can make a clear conclusion that over the past month, there has been extremely weak demand for the US currency, bears remain extremely weak and do not want to actively buy the US dollar. We can even assume that bears do not buy American currency at all. Just from time to time, the bulls reduce part of the long positions, which leads to small pullbacks. The COT report fully confirms our hypotheses and shows that since June 24, the number of buy-contracts for non-profit traders has increased from 180 thousand to 262 thousand, and the number of sell-contracts has decreased from 78 thousand to 62 thousand. Thus, the bullish mood of professional players is evident.
As for the fundamental component, it is also quite difficult to say something new. Recently, a convention of the US Republican Party took place, at which Donald Trump was officially nominated for the post of US President. However, no one doubted this, so it is difficult to call this message important news. The talks between Robert Lighthizer and Chinese Secretary of State Liu He turned out to be no negotiations at all, but a banal discussion of the implementation of the "first phase" of the trade agreement. However, according to other information, China does not fully comply with the terms of the deal, but either Washington is satisfied with this (the world is still raging epidemic and economic crisis), or the White House simply does not declare this, fearing even more tension in relations with Beijing. In this issue, we should understand the entire essence of the confrontation between Beijing and Washington. The United States, which is used to acting from a position of force, threat and imposition of its own opinion, simply cannot back down and, for example, give in to China. Let's consider a hypothetical situation: China does not fulfill the terms of the deal or fulfills them, but not in full, and it is not profitable for the States to further aggravate relations with China, since their economy already lost 33% in the second quarter. What should I do in this case? Pretend that everything is fine and continue to maintain the appearance of war and confrontation with China. Therefore, Washington continues to impose unnecessary and uninteresting sanctions against certain Chinese officials and companies because of the "Hong Kong issue", because of the "Uighur issue" and other equally "fake" reasons. As a result, the press creates the appearance that the countries continue to be in a state of conflict, and the leaders of these countries and Foreign Ministries continue to regularly accuse each other of all mortal sins. In practice, it is not profitable for either of them to stop trading and impose new sanctions. The States that actually initiated the trade war could afford such actions in 2018. Now there isn't. But Trump can't say to China, "Hey, guys, this is a global crisis, let's temporarily put our conflict on hold, continue when it's over." Therefore, all the threats of Donald Trump that have been voiced recently can be safely divided into 8. Or 28. Washington will not stop trading with China. The White House is not going to completely stop cooperation with Beijing. Because this will threaten the United States with huge losses, first of all.
Other important topics for the US dollar are also put on pause. The fate of the new 1-trillion or 3-trillion stimulus package is still unclear. This package should have been passed a month ago, but Democrats and Republicans have not been able to agree on it. And there is no new information about this. Either the negotiations are continuing, or the parties have decided to put them on pause too.
But in some cities of the United States, mass protests and rallies again broke out under the same social movement "Black Lives Matter". We have already written about a new incident between the police and a black man in Wisconsin. Today, it became known that after the bullet wounds, Jacob Blake was alive, but at the same time his whole body was paralyzed. The town of Kenosha, where everything happened, was immediately engulfed in riots, arson and clashes with the police. Donald Trump has already responded to this event and wrote on Twitter: "The Governor should call the national guard to the state and end the problem as soon as possible." As we can see, Trump has not learned any lessons from his previous mistakes. He is still ready to disperse all the protesters with the help of the national guard, which is likely to further incite the protesters against him. Not to mention a new possible drop in ratings.
Macroeconomic statistics on Wednesday were only in the States. The report on orders for durable goods was quite strong. The main indicator grew by 11.2% in July, the indicator excluding defense and aviation orders – by 1.9%, the indicator excluding defense orders – by 9.9%, and the indicator excluding transport orders – by 2.4%. All four indicators were stronger than their forecasts. However, the US dollar did not get any special benefit from this report. Thus, we once again state the fact that traders continue to ignore most of the macroeconomic reports.
Based on the current technical picture, it is absolutely impossible to assume what will happen tomorrow or in a week. In fact, the flat is now maintained in the 200-point range. And on the 18th, we just saw an unsuccessful attempt to break out of the channel of 1.17-1.19. If we do not take into account the events of August 18-19, the euro/dollar pair continues to trade strictly between the levels of 1.1700 and 1.1900 for more than a month.
The volatility of the euro/dollar currency pair as of August 27 is 78 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1748 and 1.1904. The reversal of the Heiken Ashi indicator downwards signals a new round of downward movement.
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 is trying to continue its downward movement and is located slightly below the moving average. Thus, today it is recommended to open new long positions with the goals of 1.1904 and 1.1963, only if the pair returns to the area above the moving average line. Since the price is now below the moving average, it is recommended to trade lower with the goals of 1.1748 and 1.1719. Further downward movement will be possible only after confident overcoming of these goals.
