Overview of the EUR/USD pair. September 3rd. Preview of the week. Lagarde’s speech and GDP
September 3, 2023 12:22 pm
The EUR/USD currency pair unexpectedly resumed its downward movement on Friday. Recall that earlier in the week, the price had settled above the moving average line, thanks to weak macroeconomic data from America in the first three days. However, the statistics did not provide much optimism for the remaining two days of the week; nevertheless, the market found reasons to buy the US dollar. And that is very favorable from our perspective.
We have repeatedly stated that we see no grounds for the European currency to rise globally. Naturally, upward corrections will occur, but there is no talk of a new rise to the 12th level or higher. On the contrary, the minimum target for the decline is levels 5 and 6. And these targets appear to be only the first, as the decline is expected to continue.
Theoretically, by the end of this year, the dollar may begin to lose its advantage if the Fed signals its readiness to start easing monetary policy. However, this may only happen for a few months. Until that time, the dollar should continue to rise.
This is because for the past 11 months, it has been on a continuous decline, and we have repeatedly wondered why it is falling when the Fed is raising rates more strongly and quickly than the ECB, and the macroeconomic statistics in the United States are much better than in the European Union. Finding an answer to this question was very difficult, but justice had to prevail sooner or later.
Returning to Friday, Non-Farm Payrolls slightly exceeded expectations, but the July figure was revised downward. The unemployment rate jumped by 0.3%, which was unexpected. The ISM Business Activity Index in the manufacturing sector increased, but it increased below the “waterline,” which is unimportant. Thus, there were no grounds for a strong rise in the US currency on Friday. The fact that it did rise indicates the market’s readiness to buy the dollar.
Important events are on the horizon, but they are few.
Next week, there will be limited macroeconomic data, but there will be significant fundamental events. For instance, Christine Lagarde is scheduled to speak on Monday. Additionally, Philip Lane and Fabio Panetta from the ECB will also speak. The European regulator faces many questions about the “autumn part of the marathon,” as some
monetary committee members no longer support further tightening. Lagarde at Jackson Hole talked about the need to maintain rates at a high level, not about new increases. The more the market becomes convinced that a pause awaits us in the autumn and the end of the cycle, the stronger the euro should fall.
On Tuesday, there will be another speech by Christine Lagarde. Along with that, Isabel Schnabel and Luis de Guindos will also speak. These officials are also expected to explain interest rates and the regulator’s plans. In addition, the Business Activity Index in the service sector for August (final value) and the Producer Price Index will be published. Retail sales will be released on Wednesday, September 6th, and on Thursday, the third estimate of GDP (final) for the second quarter. We may see adjustments to the second and first estimates, which recorded economic growth at 0.3% q/q. If it turns out that the EU economy grew weaker, it could again trigger a decline in the European currency.
It will be relatively calm on Friday, with only the final inflation figures for Germany in August expected to be released. Therefore, market attention will be focused on GDP and Lagarde’s speeches next week. We believe that dovish rhetoric and weak economic growth can be expected. The pair has formally corrected, so it may continue to decline.
The average volatility of the EUR/USD currency pair over the last five trading days as of September 3rd is 89 points, characterized as “medium.” Thus, we expect the pair to move between the levels of 1.0687 and 1.0865 on Monday. An upward reversal of the Heiken Ashi indicator will indicate a new phase of upward correction.
Nearest support levels:
S1 – 1.0742
S2 – 1.0681
S3 – 1.0620
Nearest resistance levels:
R1 – 1.0803
R2 – 1.0864
R3 – 1.0925
Trading recommendations:
The EUR/USD pair has fallen back below the moving average. Maintaining short positions with targets at 1.0742 and 1.0687 is advisable until a Heiken Ashi reversal occurs. Long positions can be considered if the price consolidates above the moving average line with targets at 1.0925 and 1.0986.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both channels are pointing in the same direction, it indicates a strong trend.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel in which the pair will move in the next 24 hours, based on current volatility indicators.
CCI indicator – its entry into the overbought area (above +250) or oversold area (below -250) indicates an impending trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
The EUR/USD currency pair unexpectedly resumed its downward movement on Friday. Recall that earlier in the week, the price had settled above the moving average line, thanks to weak macroeconomic data from America in the first three days. However, the statistics did not provide much optimism for the remaining two days of the week; nevertheless, the market found reasons to buy the US dollar. And that is very favorable from our perspective.
We have repeatedly stated that we see no grounds for the European currency to rise globally. Naturally, upward corrections will occur, but there is no talk of a new rise to the 12th level or higher. On the contrary, the minimum target for the decline is levels 5 and 6. And these targets appear to be only the first, as the decline is expected to continue.
Theoretically, by the end of this year, the dollar may begin to lose its advantage if the Fed signals its readiness to start easing monetary policy. However, this may only happen for a few months. Until that time, the dollar should continue to rise.
This is because for the past 11 months, it has been on a continuous decline, and we have repeatedly wondered why it is falling when the Fed is raising rates more strongly and quickly than the ECB, and the macroeconomic statistics in the United States are much better than in the European Union. Finding an answer to this question was very difficult, but justice had to prevail sooner or later.
Returning to Friday, Non-Farm Payrolls slightly exceeded expectations, but the July figure was revised downward. The unemployment rate jumped by 0.3%, which was unexpected. The ISM Business Activity Index in the manufacturing sector increased, but it increased below the “waterline,” which is unimportant. Thus, there were no grounds for a strong rise in the US currency on Friday. The fact that it did rise indicates the market’s readiness to buy the dollar.
Important events are on the horizon, but they are few.
Next week, there will be limited macroeconomic data, but there will be significant fundamental events. For instance, Christine Lagarde is scheduled to speak on Monday. Additionally, Philip Lane and Fabio Panetta from the ECB will also speak. The European regulator faces many questions about the “autumn part of the marathon,” as some
monetary committee members no longer support further tightening. Lagarde at Jackson Hole talked about the need to maintain rates at a high level, not about new increases. The more the market becomes convinced that a pause awaits us in the autumn and the end of the cycle, the stronger the euro should fall.
On Tuesday, there will be another speech by Christine Lagarde. Along with that, Isabel Schnabel and Luis de Guindos will also speak. These officials are also expected to explain interest rates and the regulator’s plans. In addition, the Business Activity Index in the service sector for August (final value) and the Producer Price Index will be published. Retail sales will be released on Wednesday, September 6th, and on Thursday, the third estimate of GDP (final) for the second quarter. We may see adjustments to the second and first estimates, which recorded economic growth at 0.3% q/q. If it turns out that the EU economy grew weaker, it could again trigger a decline in the European currency.
It will be relatively calm on Friday, with only the final inflation figures for Germany in August expected to be released. Therefore, market attention will be focused on GDP and Lagarde’s speeches next week. We believe that dovish rhetoric and weak economic growth can be expected. The pair has formally corrected, so it may continue to decline.
The average volatility of the EUR/USD currency pair over the last five trading days as of September 3rd is 89 points, characterized as “medium.” Thus, we expect the pair to move between the levels of 1.0687 and 1.0865 on Monday. An upward reversal of the Heiken Ashi indicator will indicate a new phase of upward correction.
Nearest support levels:
S1 – 1.0742
S2 – 1.0681
S3 – 1.0620
Nearest resistance levels:
R1 – 1.0803
R2 – 1.0864
R3 – 1.0925
Trading recommendations:
The EUR/USD pair has fallen back below the moving average. Maintaining short positions with targets at 1.0742 and 1.0687 is advisable until a Heiken Ashi reversal occurs. Long positions can be considered if the price consolidates above the moving average line with targets at 1.0925 and 1.0986.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both channels are pointing in the same direction, it indicates a strong trend.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel in which the pair will move in the next 24 hours, based on current volatility indicators.
CCI indicator – its entry into the overbought area (above +250) or oversold area (below -250) indicates an impending trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
Related Posts: