EUR/USD Preview of the week: comments by members of the Fed and the ECB, US statistics and prospects for a trade war

The euro/dollar bears tested the ninth figure again on Friday, but the downward impulse died away before it started. In the last hours of the trading week, many traders took profits without risking leaving open positions for the weekend. The fundamental background for the dollar is still unreliable, and the events of the last week of September can affect the pair dramatically.

Not so many important macroeconomic reports are expected this trading week. The main focus of the market will be on the dynamics of the development of US-Chinese trade relations and on the comments of Fed and ECB officials. Geopolitics will also play a role in determining the growth or decline of anti-risk sentiment in the foreign exchange market. First of all, we are talking about the situation in the Middle East, where a military conflict between Saudi Arabia and Iran is not ruled out.

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If we talk about planned events that are important for EUR/USD traders, then here, we should highlight the speeches of "top officials" of the Central Banks. For example, the head of the ECB, Mario Draghi, will speak in Brussels today at 15:00 UTC. He will voice the report to the members of the Committee on Economic and Monetary Affairs of the European Parliament. Since the topic of the report is directly related to monetary policy, the market will show particular interest in it. Let me remind you that according to the results of the last meeting of the European regulator, the EUR/USD pair actually received support despite the easing of the monetary policy parameters. The euro was supported by two facts: first, the regulator did not meet investors' expectations. According to general forecasts, the Central Bank should have resorted to larger-scale actions (lowering the rate to -0.6% and QE in the amount of 40-50 billion); Second, traders drew attention to the split that occurred in the camp of the ECB as some members of the regulator opposed the resumption of the incentive program.

In this context, what's more interesting is not Mario Draghi's personal position on these circumstances (in the light of his resignation in late October), but his comments on the sentiments that are found among the members of the European Central Bank. If the essence of his rhetoric is reduced to a wait-and-see attitude, the euro will receive some support.

On Thursday, September 26, will be a rather informative day this week. Six members of the Fed will speak at once during the American session: Robert Kaplan, James Bullard, Richard Clarida, Mary Daley, Neil Kashkari, and Thomas Barkin. It is worth noting that the Federal Reserve also did not demonstrate a monolithic position regarding the September rate cut and further prospects of monetary policy; for example, such members of the Federal Reserve as the head of the Kansas Federal Reserve Bank Esther George and the head of the Boston Federal Reserve Eric Rosengrenopposed the interest rate cut again. In addition, ten members of the regulator said they did not see any reason for easing monetary policy by the end of this year, while seven of their colleagues still allowed this option. As for the prospects for 2020, eight members of the Committee stated the need to maintain a wait-and-see attitude, while the rest of the top Fed officials said that the regulator should back raise the rate by at least 25 points. Given such a divergence of opinions, each comment by the Fed representative (especially those with voting rights) is of interest.

If we talk about macroeconomic statistics, the most important releases for the pair will come from the United States. Conference Board Consumer Confidence Index will be published tomorrow, Tuesday. In July and August, it came out at fairly high values at 135.8 and 135.1, respectively, supporting the US currency. According to experts' general forecasts, the September index will reach 134.1 points. This is a good result but still worse than summer performance. The dollar will react to this release only if it comes out much worse than the forecast values, reflecting the uncertainty of American consumers.

On Wednesday, attention should be focused on the volume of home sales in the primary US market. After a significant decline, positive dynamics are expected. But on Thursday, it will shift to the final assessment of US GDP growth for the 2nd quarter. According to forecasts, this indicator will not be revised. Otherwise, this release may cause increased volatility for the pair.

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On Friday, EUR/USD traders will be interested in the main index of personal consumption spending, which measures the core level of spending and indirectly affects the dynamics of inflation in the United States. It is believed that this indicator is monitored carefully by regulator members. According to forecasts, the index will show contradictory dynamics. In monthly terms, it will decrease to 0.1% but it will rise to 1.8% in annual terms. This release may have an impact on the dynamics of the pair only with strong fluctuations when the real numbers differ significantly from the forecast values.

The European currency will respond to the reports of PMI (today) and IFO (on Tuesday), but their impact on the pair is usually short-term.

In general, the tone of the bidding will be set by the comments of representatives of the ECB and the Fed and macroeconomic reports. The dynamics of the development of the trade war will serve as a backdrop to the above fundamental factors. Particularly on Friday, it became known that the US authorities introduced a temporary exemption from duties for more than 400 goods that are imported from China. This is another sign of a de-escalation of the trade conflict. If this week the parties take the next steps in this direction, the dollar will receive significant support. Indeed, in this case, the probability of a further reduction in the Fed interest rate will significantly decrease.

From a technical point of view, the EUR/USD pair needs to leave the range of 1.0950 - 1.1100, which are the lower and upper lines of the Bollinger Bands indicator, respectively. Only in this case will it be possible to talk either about the continuation of the downward trend or about the signs of its fracture. In fact, the pair has been trading in the indicated price range as part of a wide-range flat since the beginning of September.

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Indicator analysis. Daily review on September 23, 2019 for the GBP / USD currency pair

Trend analysis (Fig. 1).

On Monday, the price may continue to move down to a pullback level of 23.6% - 1.2435 (blue dotted line) and in case of breaking through, further down to 1.2364 - 21 average EMA (black thin line).

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Fig. 1 (daily chart).

Comprehensive analysis:

- indicator analysis - down;

- Fibonacci levels - down;

- volumes - up;

- candlestick analysis - down;

- trend analysis - up;

- Bollinger Lines - up;

- weekly schedule - up.

General conclusion:

On Monday, the price may continue to move down.

An unlikely scenario is an upward movement, with the target at 1.2583 - an upper fractal.

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Technical analysis of ETH/USD for 23/09/2019

Crypto Industry News:

The US House of Representatives' Financial Services Committee has scheduled a hearing with the chairman of the Securities and Exchange Commission, Jay Clayton and four other SEC commissioners to discuss, among other things, cryptocurrencies.

In a memorandum of 19 September, the Financial Services Committee announced that a hearing would be held on 24 September. In addition to Clayton, Commissioner Hester Peirce (also known as Crypto Mom) and three other people will be present.

The Financial Services Commission has included cryptocurrencies on its list of discussion topics and points out that federal securities laws apply to securities - including shares, bonds and investment agreements - regardless of whether they are digital.

The hearing will apply to ETFs, regardless of whether digital assets are a security or are exempt from securities regulations, as well as the planned launch of Facebook Libra in 2020.

"Libra Investment Token may be security token because it is intended for sale to investors to finance initial costs and provide them with dividends. The Libra token itself may also be a security, but Facebook does not intend to pay dividends and it is unclear whether investors would have" reasonable expectations about profits "- we read in the document.

Technical Market Overview:

The ETH/USD pair has completed the wave (3) of the overall impulsive cycle and is currently developing the wave (4) of the overall correction. So far the market has made only a wave A of this correction with a low located at the level of $205.15. The next target for bears is seen at the level of $202.70 where is the low of the previous wave four of the lesser degree located. Please notice, that after the corrective cycle in wave 4 is completed, there is still wave 5 to the upside needed to complete the overall impulsive cycle up.

Weekly Pivot Points:

WR3 - $261.09

WR2 - $242.26

WR1 - $225.12

Weekly Pivot - $205.85

WS1 - $188.31

WS2 - $169.05

WS3 - $152.55

Trading recommendations:

The best strategy in the current market conditions is to trade with the larger timeframe trend, which is still up. All the shorter timeframe moves are being treated as a correction inside of the uptrend. The current cycle is wave 2 of the lower wave degree and it might have been completed, so the uptrend should resume soon. The global investors are waiting for a breakout above the level of $202.59 and $238.68 to confirm the resumption of the uptrend.

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Indicator analysis. Daily review on September 23, 2019 for the EUR / USD currency pair

Trend analysis (Fig. 1).

On Monday, an upward movement with the first target of 1.1037 is possible - a pullback level of 38.2% (red dashed line). Further, we will wait for the market reaction to the resistance line 1.1039 (blue bold line).

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Fig. 1 (daily chart).

Comprehensive analysis:

- indicator analysis - up;

- Fibonacci levels - up;

- volumes - up;

- candlestick analysis - up;

- trend analysis - up;

- Bollinger Lines - up;

- weekly schedule - up.

General conclusion:

On Monday, the upward movement will continue.

The first upper target of 1.1037 is the pullback level of 38.2.% (red dashed line). Upon breaking through this level, we are waiting for the continuation of work upwards, with the next target of 1.1051 - a pullback level of 50.0% (red dashed line).

An unlikely scenario is a downward movement with the target at 1.0991 (lower fractal).

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GBP/USD: plan for the European session on September 23. Junker's promises are different from reality. Breakthrough of support

To open long positions on GBP/USD you need:

Bears quickly returned the market to its place after the euphoria from Juncker's statements about the possible conclusion of an agreement had dried up. At the moment, the bulls need to form a false breakdown in the support area of 1.2460, and this will be the first signal to open long positions. However, it is more likely that sellers will give way to this support, therefore it is best to count on long positions for a rebound near last week's low in the area of 1.2393. The main goal of buyers will be a breakthrough and consolidation above the resistance of 1.2522, which will lead to an update of the upper boundary of the current side channel in the region of 1.2586, where I recommend taking profits.

To open short positions on GBP/USD you need:

Bears will be active after an upward correction to the resistance area of 1.2522, where the formation of a false breakdown will be the first signal to open short positions in the expectation of a further decline in the pair and a break of the low of 1.2460. After consolidating below this resistance, we can expect GBP/USD to return to a larger support of the previous week - 1.2393, where I recommend taking profits. If the bears do not have enough strength to keep the pair below 1.2522, it is best to consider new short positions from the upper boundary of the side channel of 1.2586.

Signals of indicators:

Moving averages

Trading is below 30 and 50 moving averages, indicating a slight advantage to pound sellers.

Bollinger bands

A break of the lower boundary of the indicator at 1.2460 will increase pressure on the pound.

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Description of indicators

  • MA (moving average) 50 days - yellow
  • MA (moving average) 30 days - green
  • MACD: Fast EMA 12, Slow EMA 26, SMA 9
  • Bollinger Bands 20
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