The trading week is coming to an end. If we analyze all the trades that occurred this week, we will see that reaching the psychological level of 1.2000 was a triumph for the bulls, but unfortunately, it did not last long, since it provoked massive long positions, which led to a flurry of sales and decline in prices to the average level of 1.1800.
That said, most traders, as well the ECB, were satisfied with the development, since an overbought European currency may lead to a setback in economic recovery. A tremendous rise in price could negatively affect the volume of European exports, further weaken inflation and increase the need of monetary stimulus.
"In the past few weeks, we have seen a strong rise in the euro, which is worrying especially if it is accompanied by weak demand. The eurozone economy is the most open in the world and is highly dependent on global demand, "the ECB said.
Thus, if we look at the chart of the M15 TF, we will see that during the Asian session, EUR / USD declined sharply, moving towards a price level of 1.1790 / 1.1800. But then at the start of the European session, a round of long positions has risen, and it returned the quote back to 1.1855 / 1.1865.
Such gave a slight deceleration in volatility by 11%, which may signal an accumulation. It also resulted in a dynamics of only 75 points, which is very low compared to the records of the past trading days.
Nonetheless, traders still did follow the suggestions in the previous review , however, the downward move only occurred after a consolidation below 1.1780 / 1.1790.
Hence, in the daily chart, it can be seen that the quote is trying to move to a large-scale correction, but something keeps it at the conditional peak of the inertial move.
With regards to news, retail sales in Europe accelerated from 1.3% to 3.7%, instead of increasing to only 0.4%. Such data is very terrible, and many investors are literally in a stupor because of it. Nonetheless, EUR / USD was not affected by the data.
Even good data on US jobless claims failed to move the market in favor of the US dollar. Latest report indicated that first time applications dropped from 1,011,000 to 881,000, and repeated ones decreased from 14,492,000 to 13,254,000.
Today though, another report on the US labor market will be released, and it may now affect demand for currencies in the market. If data indicates an improvement in the situation, that is, a decrease in unemployment from 10.2% to 9.9% and about 1,490,000 new jobs outside agriculture, USD may increase against other world currencies.
As for next week, the market will not be that busy, since it would begin with a weekend in the United States. Macroeconomic reports will only start coming out on Tuesday, among which is the Q2 GDP for the Eurozone. The week will end with the publication of inflation data in the United States
Monday, September 7
US - Labor Day (Weekend)
Tuesday, September 8
EU 10:00 - Gross Domestic Product (Q2)
Thursday, September 10
EU 12:15 - ECB meeting
EU 13:30 - ECB press conference
US 13:30 - Jobless claims
Friday, September 11
US 13:30 - Inflation, for August
Further development
As we can see on the trading chart, EUR / USD fluctuated within 1.1840 / 1.1865, which indicates accumulation and an upcoming acceleration. A breakout from this will provoke a flurry of speculations, during which it will be possible to gain profit through local jumps in the market.
If we consider main positions, for example, a bearish movement, consolidating the price below 1.1780 / 1.1790 seems profitable, and it will also provide a clear signal that EUR / USD will head to 1.1754-1.1710.
However, EUR / USD will move the opposite way and move towards 1.2000 if the quote consolidates above 1.1880.
Indicator analysis
Looking at the different time frames (TF), we can see that the minute and hourly periods have a variable signal, largely due to the accumulation in EUR / USD. The daily period also has an unstable signal, but its main signal is to sell.
Weekly volatility / Volatility measurement: Month; Quarter; Year
Volatility is measured relative to the average daily fluctuations, which are calculated every Month / Quarter / Year.
(The dynamics for today is calculated, all while taking into account the time this article is published)
Thus, volatility is at 25 points today, which is 70% below the average. This is because speculation is very low today, due to market jumps that could occur amid the upcoming US Non-Farm Payrolls report.
Key levels
Resistance zones: 1.1910 **; 1.2000 ***; 1.2100 *; 1.2450 **; 1.2550; 1.2825.
Support Zones: 1,1800; 1.1650 *; 1,1500; 1.1350; 1.1250 *; 1.1180 **; 1.1080; 1.1000 ***.
* Periodic level
** Range level
*** Psychological level
Also check trading recommendations for the GBP/USD pair here, or brief trading recommendations for the EUR/USD and GBP/USD pairs here.
