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Hello, dear colleagues!
At the trading on July 20-24, the US dollar was under selling pressure across the entire spectrum of the currency market. The "American" weakened against all major competitors, while the single European currency showed the largest growth in the pair with the USD, strengthening by 1.98%.
The main influence on the course of the last five days of trading has had a historical EU summit; the confrontation between the US and China, which escalated into a diplomatic trade; records of the United States, according to the daily number of infected COVID-19, progress on the development of vaccines against coronavirus, the debate in the US Congress to adopt a new Federal assistance program. In general, there were a lot of events and last week was quite stormy. At the same time, macroeconomic statistics almost went unnoticed by market participants. Now let's briefly run through some of the listed topics.
COVID-19. The situation in the United States continues to be the worst in the world. At the end of last week, it was reported that the number of infected people in the United States exceeded 4 million people.
In Europe, the situation with the insidious pandemic is much better, however, there are also negative aspects. So in France, new COVID-19 foci suddenly broke out, of which there are about ten. In addition, more than a thousand carriers of a new type of coronavirus infection were found. Virologists believe that the main reason for this development is the removal of restrictive measures and the French neglect of precautionary measures.
USA and China. After the events in Houston, where the Chinese Consulate was accused of espionage and the institution was given 72 hours to curtail its activities, the Chinese authorities gave a worthy response and demanded that the United States close its Consulate in the city of Chengdu. The tense situation between the countries with the first and second world economies unnerves market participants and has a significant impact on the weakening of risk appetite.
Fundamental background. I believe that there is no need to re-examine the past and recall last week's macroeconomic statistics. We need to look ahead. If so, I will immediately note that the five-day trading period that has begun will be saturated with a large flow of macroeconomic information, which I will remind you of as it arrives, that is, directly on the day of the reports' release. However, it is necessary to emphasize one of the most important events, in my opinion. This is the decision of the Federal Reserve System (Fed) on rates, followed by the publication of updated economic forecasts and a press conference by Fed Chairman Jerome Powell. All this will happen on Wednesday evening and will have a significant impact on the exchange rate of the US currency. Either the US dollar will continue its inglorious fall, or it will turn to strengthening, which will most likely be of a corrective nature. I would like to remind you that depending on the situation, the Fed's rhetoric may be perceived differently, so everything is the will of market participants.
Weekly
As already noted at the beginning of the article, the main currency pair of the Forex market finished the last trading week with a strong growth, closing the session at 1.1654. In the previous review, it was mentioned that in case of passing the resistance of sellers in the area of 1.1600-1.1625, the euro/dollar will rush to the 17th figure and will test a strong technical zone of 1.1700-1.1715 for a breakdown. Given the confident closing above 1.1625, it is highly likely that further growth into the designated resistance zone can be assumed. However, this does not mean the cancellation of corrective rollbacks, the goals of which will be determined on lower timeframes.
Daily
Given a fairly strong and confident six-day growth, we can conclude about the strength of the current upward trend. Usually, in such situations, corrective pullbacks are extremely small, after which the movement in the direction chosen by the market continues.
In the author's personal opinion, the goals of a possible exchange rate adjustment may be the levels of 1.1625, 1.1600, and 1.1570. We can not completely exclude a short-term flight of the price below the 1.1540 mark. However, if you decline below the 1.1600 level, you will need to monitor the price behavior very carefully. If the euro/dollar is fixed at 1.1600, there will be doubts about the pair's ability to rewrite the previous highs at 1.1657 and continue climbing to the area of 1.1700-1.1715.
In the meantime, at the moment, the main trading recommendation for EUR/USD is purchases that should be considered near the above-listed goals of probable exchange rate adjustment.
To conclude this article, let me remind you that today at 09:00 (London time), Germany will publish indices from the Ifo on the business climate, economic expectations and current conditions. In turn, at 13:30 (London time), the United States will provide data on orders for durable goods. Despite the fact that the market reacted rather sluggishly to statistical information last week, it is possible that today's reports will have an impact on the price dynamics of the main currency pair.
Good luck!
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