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Hello, dear colleagues!
At yesterday's trading, the main currency pair of the Forex market continued to grow. And here it is worth noting that the last time the quote was traded at such levels in June 2019. As usual, we will return to the technical picture of EUR/USD a little later, but for now a little about the external background and market sentiment.
After the recently concluded very difficult EU summit, investors' appetite for risk has increased even more. For the most part, this was the driver of the strengthening of the single European currency. However, the tense relationship between the US and China, which has worsened after Washington's accusations that China is to blame for the spread of COVID-19 around the world, market participants have lost their appetite for risky operations. Especially against the background of events in Houston, where the White House administration banned the work of the Chinese Consulate. However, US-China relations and events in Houston did not significantly affect market sentiment. The trade war and tension between the United States and China has been going on for quite a long time and it is unknown when it will end, or whether it will end at all. There is hope that after the US elections and the likely victory of Joe Biden, the situation will improve.
Regarding the outcome of the four-day EU summit, European Central Bank (ECB) President Christine Lagarde believes that a better compromise could have been found. Lagarde believes that a larger share of grants compared to loans would be more effective in restoring the economies of the European states most affected by COVID-19. In the author's personal opinion, it is good that something was agreed at all, and the EU countries were able to officially adopt a seven-year budget and a plan to restore the region's economy.
If you dig deeper about the next steps of the ECB itself, it is expected that the European regulator will continue to soften the capital requirements for Eurozone banks and recommend suspending the payment of dividends in connection with the recession that covered the European economy after the outbreak of coronavirus.
As has been noted many times, it is too early to consider COVID-19 a problem that has sunk into oblivion. This is evidenced by the constantly occurring outbreaks of the pandemic in different parts of the world, including in Europe. Whether this is the agony of a new type of coronavirus infection or a signal for its continuation, time will show. I would very much like this to be the first option. And it's time for us to consider the price charts of the euro/dollar currency pair.
Daily
After the strong resistance level of sellers at 1.1494 was broken on July 21, the growth continued with a new force. The pair easily passed the important psychological mark of 1.1500 and is now trading near another strong technical level of 1.1570. I would like to note that this level is weekly, so the euro bulls need to close trades on July 20-24 above this mark to demonstrate the seriousness of their further intentions. Looking at the daily chart in its more compressed form, after the breakdown of 1.1500, it is highly likely that the trend for EUR/USD has changed to an upward one. This means a medium and long-term perspective. The bearish divergence of the MACD indicator is still completely ignored by the trading participants and in the coming days, if the rise continues, it may be broken.
H4
Looking at the hourly chart, the question arises: "Where should the peasant go?" It is clear that the trade is bullish and the main trading idea is to buy the euro/dollar pair, however, the pair has not been trading at such high prices for a long time, so for some reason you do not want to buy at them, and even somehow it is scary. However, as we can see, the market gives small corrective pullbacks, after which growth resumes.
So, to open long positions on the EUR/USD pair, I suggest waiting for corrective pullbacks to the price zone 1.1535-1.1510 and planning purchases from there. As usual, bullish models of Japanese candlesticks that appear in the selected area will confirm the correctness of this idea.
Given the overbought euro/dollar and the presence of strong resistance near 1.1600, if bearish candle signals appear at this level, there will be an option for selling the single currency. At the same time, I do not recommend setting large goals, the area for profits 1.1570-1.1530. It is also worth understanding that short positions are against the current bullish trend, and therefore carry the greatest risks.
If you look at the current economic calendar, you can find that there are no significant macroeconomic statistics that can affect the price dynamics of the main currency pair. Except for the initial applications for unemployment benefits in the US, which will be published at 13:30 (London time).
Good luck with trading!
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