31.08.202009:44 Forex Analysis & Reviews: Analysis and forecast for EUR/USD on August 31, 2020

Last week, the already weak US dollar came under even more selling pressure across the entire spectrum of the market after the announcement by the head of the Federal Reserve System (FRS), Jerome Powell, of a new strategy in monetary policy. First of all, this applies to such important economic aspects as inflation and employment. The head of the Fed announced the goal of achieving an average inflation rate of 2%, with a possible excess of this level to compensate for the period of time when inflation was lower. At the same time, even when inflation exceeds 2 percent, rates will remain near zero for a long time. I would like to remind you that since 2012, the US Central Bank has not been able to achieve its own inflation goals of 2%, but now, in some unknown way and with a serious attitude, the Fed is going to fulfill this task. As for employment, despite the inflationary component, it should not fall below its maximum levels. To sum up Powell's statement, the new monetary policy of the Fed with a very long period of low interest rates will contribute to the weakening of the US dollar in the medium and long term.

Regarding COVID-19, the situation is as follows. As of yesterday, there are already more than 25 million people infected with the coronavirus in the world. Most infections were detected in the United States, followed by Brazil, and India closes the sad three countries. At the same time, it was India that became the leader in the daily increase in COVID-19 cases. As of Sunday, the daily number of people infected in India was 78 thousand. Moreover, many virologists believe that the actual number of Indians with COVID-19 is higher in total. Now let's go to the price charts of the euro/dollar currency pair and start with the results of the past week.

Weekly

Last week, the main currency pair of the Forex market showed a strengthening of 0.85% and managed to close trading on August 24-28 above the landmark level of 1.1900. As noted in the previous review, this was the minimum task that euro bulls managed to solve. However, it was not possible to absorb the previous bearish reversal candle with growth. However, given the even more negative attitude of investors to the US currency after the speech of the head of the Fed, this is a matter of time. I believe that if the market sentiment remains unchanged, this week the euro/dollar will continue to rise and finish trading above 1.1965, which will be the fact of absorbing the bearish candle of the year before last, which can then be considered a false reversal. The bullish scenario will be canceled by the appearance of a bearish candle with the closing price below the previous minimum values at 1.1762.

Daily

Despite the fact that the bearish divergence of the MACD indicator remains on the daily chart, the market, apparently, does not think to work it out or at least discharge it. No, there were some attempts, however, the positions of euro bulls are still strong.

At the end of this article, the pair was already rising to 1.1929, but after that it retreated slightly and is now trading near the landmark level of 1.1900. In my opinion, EUR/USD has every chance of continuing the upward trend, so I consider buying to be the main trading recommendation. I suggest taking a closer look at the opening of long positions after the decline to the broken resistance level of 1.1882. At the same time, I do not rule out a short-term drop in the exchange rate to the area of 1.1865, after which I assume a fairly rapid return to 1.1900 and higher. More aggressively and riskily, you can try to buy a pair from the current prices of 1.1905. You can prepare for sales if the current highs of 1.1929 are not rewritten and reversal signals of Japanese candlesticks appear under this level on the four-hour and (or) hourly charts.