EUR/USD. September 20th. Janet Yellen: Inflation and economic growth are under control
September 20, 2023 11:25 am
The EUR/USD pair continued its upward movement on Tuesday after rebounding from the corrective level of 100.0% (1.0637) towards 1.0697. The price eventually reached this level. A rebound from 1.0697 will allow traders to anticipate a reversal in favor of the US dollar and a decline toward the 100.0% Fibonacci level. Closing above 1.0697 will increase the probability of further growth towards 76.4% at 1.0787. A more realistic target for the euro’s growth is 1.0765.
Waves still indicate a “bearish” trend. I have previously noted that for signs of the end of the “bearish” trend, prices need to rise above 1.0765. Given the current market activity, it may take a few more days. Alternatively, a new downward wave should have lows not lower than 1.0637. However, with the current trader activity, we can also expect to wait several more days for a new downward wave. Thus, once the information background strengthens, I anticipate changes in waves and market sentiment. The information background may intensify later tonight.
Meanwhile, US Treasury Secretary Janet Yellen stated that stronger economic growth corresponding to full employment potential is required to reduce inflation to 2%. It is challenging to understand what Yellen meant. I interpret it as follows: the higher the economic growth, the more challenging it is to slow down inflation. However, in the current circumstances, the Fed might even benefit from raising interest rates once or twice more to slow down economic growth and its negative impact on inflation. We will find out tonight what decision the FOMC has made. I assume that the interest rate will be increased tonight.
On the 4-hour chart, the pair has declined to 100.0% Fibonacci and remains within a descending trend corridor. A bounce from the level of 1.0639 allowed for a small rise, but I advise against expecting a significant strengthening of the euro until the price closes above the trend corridor. Closing the pair’s rate below 1.0639 increases the chances of further decline towards the 127.2% correction level at 1.0466. A “bearish” divergence was formed on the CCI indicator yesterday, which could favor the US currency today.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 23,356 long and 205 short contracts. The sentiment among large traders remains “bullish” but has noticeably weakened in recent weeks and months. The total number of long contracts speculators hold is now 212 thousand, while short contracts amount to 99 thousand. The situation will continue to shift towards the bears over time. Bulls have dominated the market for too long, and now they need a strong information background to maintain this pressure. Such a background currently needs to be improved. The high value of open Long contracts suggests that professional traders may continue to close them soon. The current figures allow for continuing the euro’s decline in the coming weeks. The ECB is increasingly signaling the end of the QE tightening procedure.
News calendar for the US and the EU:
USA – Federal Reserve Interest Rate Decision (18:00 UTC).
USA – FOMC Economic Projections (18:00 UTC).
USA – FOMC Statement (18:00 UTC).
USA – FOMC Press Conference (18:30 UTC).
On September 20th, the economic events calendar includes four important entries related to the Federal Reserve meeting. The impact of the information background on traders’ sentiment today can be significant, but only towards the end of the day.
Forecast for EUR/USD and trader recommendations:
Sales of the pair are possible today upon a rebound from the level of 1.0697 with a target of 1.0637. Buying was possible upon a rebound from the level of 1.0637 on the hourly chart, with targets at 1.0697 and 1.0760. The first target has been reached. If there is a breakout, hold long positions with the next target.
The material has been provided by InstaForex Company – www.instaforex.com
The EUR/USD pair continued its upward movement on Tuesday after rebounding from the corrective level of 100.0% (1.0637) towards 1.0697. The price eventually reached this level. A rebound from 1.0697 will allow traders to anticipate a reversal in favor of the US dollar and a decline toward the 100.0% Fibonacci level. Closing above 1.0697 will increase the probability of further growth towards 76.4% at 1.0787. A more realistic target for the euro’s growth is 1.0765.
Waves still indicate a “bearish” trend. I have previously noted that for signs of the end of the “bearish” trend, prices need to rise above 1.0765. Given the current market activity, it may take a few more days. Alternatively, a new downward wave should have lows not lower than 1.0637. However, with the current trader activity, we can also expect to wait several more days for a new downward wave. Thus, once the information background strengthens, I anticipate changes in waves and market sentiment. The information background may intensify later tonight.
Meanwhile, US Treasury Secretary Janet Yellen stated that stronger economic growth corresponding to full employment potential is required to reduce inflation to 2%. It is challenging to understand what Yellen meant. I interpret it as follows: the higher the economic growth, the more challenging it is to slow down inflation. However, in the current circumstances, the Fed might even benefit from raising interest rates once or twice more to slow down economic growth and its negative impact on inflation. We will find out tonight what decision the FOMC has made. I assume that the interest rate will be increased tonight.
On the 4-hour chart, the pair has declined to 100.0% Fibonacci and remains within a descending trend corridor. A bounce from the level of 1.0639 allowed for a small rise, but I advise against expecting a significant strengthening of the euro until the price closes above the trend corridor. Closing the pair’s rate below 1.0639 increases the chances of further decline towards the 127.2% correction level at 1.0466. A “bearish” divergence was formed on the CCI indicator yesterday, which could favor the US currency today.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 23,356 long and 205 short contracts. The sentiment among large traders remains “bullish” but has noticeably weakened in recent weeks and months. The total number of long contracts speculators hold is now 212 thousand, while short contracts amount to 99 thousand. The situation will continue to shift towards the bears over time. Bulls have dominated the market for too long, and now they need a strong information background to maintain this pressure. Such a background currently needs to be improved. The high value of open Long contracts suggests that professional traders may continue to close them soon. The current figures allow for continuing the euro’s decline in the coming weeks. The ECB is increasingly signaling the end of the QE tightening procedure.
News calendar for the US and the EU:
USA – Federal Reserve Interest Rate Decision (18:00 UTC).
USA – FOMC Economic Projections (18:00 UTC).
USA – FOMC Statement (18:00 UTC).
USA – FOMC Press Conference (18:30 UTC).
On September 20th, the economic events calendar includes four important entries related to the Federal Reserve meeting. The impact of the information background on traders’ sentiment today can be significant, but only towards the end of the day.
Forecast for EUR/USD and trader recommendations:
Sales of the pair are possible today upon a rebound from the level of 1.0697 with a target of 1.0637. Buying was possible upon a rebound from the level of 1.0637 on the hourly chart, with targets at 1.0697 and 1.0760. The first target has been reached. If there is a breakout, hold long positions with the next target.
The material has been provided by InstaForex Company – www.instaforex.com
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