Intraday technical levels and trading recommendations for EUR/USD for July 20, 2018

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Daily Outlook

In April 2018, the EUR/USD pair outlook turned to become bearish when the pair pursued trading below the broken uptrend as well as the lower limit of the depicted consolidation range.

Shortly after, the price zone (1.1850-1.1750) offered temporary bullish rejection towards 1.1990. The EUR/USD bulls failed to pursue towards higher bullish targets. Instead, a descending high was established around 1.1990.

This was followed by bearish breakdown below the price zone of 1.1850-1.1750. This price zone has been standing as a significant Supply zone since June 2018.

On the other hand, the price zone of 1.1520-1.1420 was considered a prominent demand zone where a valid bullish BUY entry was offered during previous weeks' consolidations.

On July 10, signs of bearish rejection were manifested around 1.1750. That's why, a bearish movement was expected to occur towards 1.1650.

Lack of enough bearish momentum allowed another bullish pullback to occur towards 1.1750 (the lower limit of the depicted supply zone) where bearish pressure was expressed on Tuesday.

That's why, the EUR/USD pair remains trapped inside the consolidation range between the depicted key-levels 1.1520 and 1.1750 until breakout occurs in either direction.

Please note that any bullish breakout above 1.1750 will probably liberate a quick bullish movement towards 1.1850 (the upper limit of the depicted supply zone).

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NZD/USD Intraday technical levels and trading recommendations for July 20, 2018

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The NZD/USD pair had been trapped between the price levels of 0.7170 and 0.7350 until bearish breakdown of 0.7200 occurred on April 23.

Breakdown of 0.7220-0.7170 (neckline zone) was needed to confirm the depicted reversal pattern. Bearish target levels around 0.7050 and 0.7000 have been achieved already.

The price level of 0.7050 was considered a key-level for the NZD/USD bears That's why, bearish persistence below 0.7050 allowed further bearish decline to occur towards the price levels around 0.6800.

As anticipated, the recent bullish pullback towards the price level of 0.7050 (Broken Demand-Level) offered a good opportunity for a valid SELL entry.

A quick decline took place towards 0.6800 where a false bearish breakdown occurred. This allowed temporary bearish movement to occur towards 0.6680. However, the pair failed to maintain enough bearish momentum.

On July 7, evident bullish rejection pushed the NZD/USD pair above 0.6820 again. This was followed by a recent bullish reversal pattern (123 pattern) which enhances the bullish side of the market.

Currently, recent signs of bullish weakness are being manifested on the chart. The bulls are failing to maintain enough bullish momentum above 0.6820 which may endanger the bullish reversal scenario.

Trade Recommendations:

The price zone 0.6750-0.6800 still constitutes a demand zone to be considered for a valid BUY entry.

Bullish fixation above 0.6820 is needed to provide enough bullish momentum towards 0.6900-0.6980.

Please be cautious if the current bearish decline extends below 0.6680 as this invalidates the suggested bullish reversal pattern.

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Wave analysis of EUR / USD for July 20. Euro bounced up, but keeps the prospects of decline to 15 figure

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Analysis of wave counting:

During the trades on Thursday, the currency pair EUR / USD gained about 70 percentage points from the day's low. Thus, the assumed wave 3, 5, assumes a slightly more complicated form than was originally intended, nevertheless continues its construction. The wave 4 of the trend's downward part can theoretically take the 5-wave form of the convergent triangle. However, after completion of the construction of even 5 internal waves, a downward wave 5 should be built. Thus, based on the current wave counting, in the perspective of the next month or two, the euro has only one option, a further decline either directly from the current position or after the wave e, 4, is constructed if the transformation does happen.

The objectives for the option with sales:

1.1510 - 100.0% of Fibonacci

1.1433 - 127.2% of Fibonacci

The objectives for the option with purchases:

1.1866 - 100.0% of Fibonacci

1.2072 - 127.2% of Fibonacci

General conclusions and trading recommendations:

Ascending correction wave 2, 5, completed its construction. If this is the case, then the pair will resume in the coming days the decline in quotes with targets located near the estimated marks of 1.1510 and 1.1433, which is equivalent to 100.0% and 127.2% of Fibonacci. Therefore, I recommend selling a pair with these goals. Even if wave 4 takes a more complex look, it is unlikely to be able to update the maximum from July 9, below which a good opportunity for sales remains.

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Trump will not be able to influence the actions of the Fed

Unexpected yesterday's statements by D. Trump in the media that he is not satisfied with the strengthening of the dollar, led to a local decline in national currencies, and the question arises: should we expect to continue its decline?

In our view, although Trump's words were emotional, they contained an important aspect of the success of the post-crisis growth of the American economy, which was built and is still based on the fact that the availability of cheap loans helped the economy recover, and the current real interest rates are still at historically low levels positions. But at the same time, we must recognize that in the economy at the moment, there are processes of increasing inflationary pressures, which can not be overlooked. This means that if the Fed goes over the president's account and stops raising interest rates, inflation may get out of control, and the economy can over-heat quickly over time, which will unequivocally lead to its stalling into a new recession.

In our opinion, the words of the American president should be taken as his opinion and as a verbal intervention. He himself actually initiated the process of strengthening the growth of the dollar with a new tax reform, as well as significant budgetary allocations to support the national commodity producer. Trade wars and against this background the actual creation of greenhouse conditions for the local commodity producer will support inflation. And if in this case the Fed goes on the occasion and stops raising the cost of borrowing, then the US economy in the future will have significant problems that will unambiguously due to its influence in the world spread to the world economy. Therefore, we believe that the regulator will not change its plans, and therefore we should not expect a radical change in the monetary policy.

As for today's dynamics of the foreign exchange market, then, most likely, the overall lateral trend will continue. We continue to believe that it is possible to buy the US currency against the main currency at its local decline.

Forecast of the day:

The currency pair EUR / USD is trading below the level of 1.1685. Probably, today it will remain in the range of 1.1580-1.1685. We consider the sales of the pair on growth from the upper boundary to the target level 1.1580 to be a priority. Although it is possible and a simple price reduction to this level.

The currency pair GBP / USD is trading below the 1.3035 level. There is a possibility of its fall to 1.2900 on the wave of lower expectations that the Bank of England will raise interest rates until the fall of this year.

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Analysis of EUR / USD Divergences on July 20. Bull divergence helped the euro

4h

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The EUR / USD pair on the 4-hour chart reversed in favor of the European currency after the rebound from the correction level of 23.6% to 1.1590 and the fixation over the Fibo level of 38.2% to 1.1639. As a result, the growth process on July 20 can be continued in the direction of the next correction level of 50.0% - 1.1680. The consolidation of the pair's rate under the Fibo level of 38.2% will work in favor of the US dollar and the resumption of the fall towards the corrective level of 23.6% - 1.1590. Quit of quotes from the Fibo level of 50.0% likewise will allow some expectation to fall.

The Fibo grid is built on the extremes of June 14, 2018 and June 21, 2018.

Daily

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On the 24-hour chart, the drop in quotations continues in the direction of the corrective level of 100.0% - 1.1553. The bullish divergence of the CCI indicator is maturing: the last low of quotations may turn out to be higher than the previous one and does not correspond to the low of the indicator. The bullish divergence will allow us to count on a reversal in favor of the EU currency and some growth towards the Fibo level of 76.4% - 1.1789. Quit of quotations from the correction level of 100.0% will similarly work in favor of the euro. Fixing the pair under the Fibo level of 100.0% will increase the probability of further falling in the direction of the next correction level of 127.2% - 1.1285.

The Fibo grid is built on extremes from November 7, 2017 and February 16, 2018.

Recommendations for traders:

Buy EUR / USD on July 20 with a target of 1,1680 with a Stop Loss level under the correction level of 38.2%, as there was a close above the level of 1.1639.

To sell the EUR / USD pair will be possible with the target of 1,1590, if the closing is carried out under the correction level of 38.2%, with a Stop Loss order above the Fibo level of 1.1639.

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