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Amplitude of the last 5 days (high-low): 25p - 39p - 42p - 40p - 21p.
Average volatility over the past 5 days: 33p (low).
The EUR/USD currency pair started a downward correction against a weak upward trend, which is likely to end near the upper boundary of the Ichimoku cloud. The upward trend still persists at the moment, as the euro/dollar continues to trade above the critical line. A price rebound from this line may provoke a resumption of the upward movement, but now everything looks like a call to a new long-term drop in the European currency. We also do not expect the euro to fall below two-year lows from a fundamental point of view. There are no good fundamental reasons for this, but they are not for the serious strengthening of the euro. Not a single important macroeconomic report was made available to traders in the first three trading days of the week. Therefore, the markets and the international community can only continue to discuss a possible new round of escalation of the trade conflict between China and the United States, the topic of the impeachment of Donald Trump and the Federal Reserve minutes, which will be published tonight and with a 90% probability its content can be predicted now. Let us consider in more detail each of these factors.
In recent days, amid new statements and threats by Trump against China, traders again began to discuss a trade war and look for an answer to the question of what will happen if the parties do not agree and introduce new duties against each other. Indeed, China has not yet announced the introduction of duties, if the parties fail to agree, then there is no doubt that it will do so, since it has always responded with mirror measures to Trump's actions. In addition to threats about the introduction of new duties on Chinese imports, Trump also said that China should sign the deal that is beneficial to America. The US president does not mention why China should sign an unprofitable deal for it. However, it is not a secret for anyone that the US leader believes that Beijing needs this deal and, from his point of view, China still has to convince Washington of the advisability of signing a trade agreement. Expediency will only come when the agreement is the way Trump wants it. We believe that Trump's position obviously will not lead to de-escalation of the trade conflict. Political ratings of the US president will also suffer, although again, according to Trump himself, the current ratings are at its highest for his entire presidency.
However, the topic of ratings already refers to the Congress's investigation of the illegal activities of Trump, which, theoretically, could lead to impeachment. Few people now believe in impeachment, even the Democrats, although in public, of course, they say that the president who exceeded his authority deserves such a sentence. Trump himself said that Democrats use the topic of impeachment exclusively for political dividends, but they have the exact opposite effect. "Democrats do what they considered impossible and what the founding fathers of the United States did not want, they use falsified impeachment to receive political dividends. They try to harm the Republican Party, the US president, but achieve the opposite effect. You saw the poll - I have the highest level of support for all time," the US president said. Anticipating the question of what kind of rating he has now and where it was published, Trump said: "You won't hear about it on television, because the media and the democrats are one and the same."
Well, as for the evening publication of the minutes of the FOMC meeting, here, from our point of view, everything is as simple as possible. After three consecutive cuts in the key rate, the Federal Reserve is unlikely to go to fourth. There is no reason for this now, and many experts are even asking the question - is the Fed going lower and lower? Trump's criticism and pressure on Powell is certainly a good reason, but nonetheless. Thus, given the escalation of the trade conflict with China, the Fed, of course, can soften its monetary policy one or more times in the future, but not in the near future. Jerome Powell hinted at this, and most experts agree that three cuts would be enough to stop the impending recession. Thus, the Fed minutes is unlikely to contain any dovish notes and, for obvious reasons, will be clear of hawkish theses. Based on this, we believe that the minutes will not contain anything overly important and interesting.
The technical picture of the euro/dollar pair is also as clear as possible. The pair is correcting, maintaining the chances of continued upward movement. However, as long as it is inside the Ichimoku cloud, there remain some doubts about the strength of the bulls and their desire to continue buying the euro without any fundamental reasons and macroeconomic statistics. By the way, the growing likelihood of an escalation of the trade war with China has no negative impact on the US dollar, nor does the development of the theme of the impeachment of Trump.
Trading recommendations:
The EUR/USD pair began to adjust. Thus, it is now recommended at least to wait until the completion of the current correction, and then consider the purchase of the pair, but only in small lots, since the current movement is still identified as corrective. We recommend that you wait until the level of 1.1101 is overcome when buying the euro. It is advised to return to purchasing the US dollar no earlier than the reconsolidation of the euro/dollar pair below the critical Kijun-sen line with the aim of the support level of 1,1008.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicator window.
Support / Resistance Classic Levels:
Red and gray dotted lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movements:
Red and green arrows.
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