InstaForex

August 31, 2021

Overview of the EUR/USD pair. August 31. We are waiting for a very interesting week. The euro will try to build on its success in recent days.

 Technical details: 

Higher linear regression channel: direction - downward. 

Lower linear regression channel: direction - downward. 

Moving average (20; smoothed) - upward. 

CCI: 126.5155


The EUR/USD currency pair was trading very calmly again on Monday. Nothing interesting happened during the first trading day of the week. However, no interesting events were planned for the first working day of the week. Last Friday, the euro/dollar pair rose quite a lot. "Quite strongly" in the current reality is 44 points. It is "quite weak." However, the pair continues to trade with minimal volatility. On Friday, when Jerome Powell's speech took place, the markets had been waiting for more than a week, the total volatility was "unrealistic" 67 points. Thus, the euro/dollar pair remains in an upward movement. However, this movement can be very sluggish and slow.


There can be no claims against it. It does not stand still and even reacts to macroeconomic statistics and fundamental events from time to time. The question is that the volatility has decreased at least one and a half times, which greatly complicates the trading process. However, those who are warned are armed. Traders now need to clearly understand that three out of five trading days pass with minimal volatility or in a complete flat. Therefore, at the slightest signs of the first or second occurrence, you should leave the market or trade as carefully as possible. In general, all technical and fundamental factors continue to indicate favor of the growth of the European currency.


Moreover, these factors are either technical or from America. Nothing interesting is happening in the European Union right now. Nevertheless, based on them, the US dollar should start a new round of decline, which should continue at least to the level of 1.2240. However, with the current volatility indicators, the pair will get to this level for a couple of months. We still expect the upward trend to resume and believe that the second round of global correction against the upward trend, which has lasted for more than 18 months, ended a week ago.


Now let's figure out what to expect from the new week that started yesterday? The first trading day passed without any important news and publications, so we did not miss anything at all. All the most interesting things are planned for the rest of the week. The consumer price index will be published in the European Union on Tuesday. The inflation indicator itself is quite important. However, it does not always provoke at least some reaction from the markets. However, this time, there should be a reaction since, by the end of August, inflation may increase from 2.2% y/y to 2.7% y/y. It is a relatively high forecast, which may not be confirmed. But if it is confirmed, then Christine Lagarde will have to come to the forefront and explain what the ECB will do with such inflation, which may continue to accelerate in the coming months. On Wednesday, the European Union will publish the business activity index in the manufacturing sector for August, which can provoke a reaction of traders only in case of a serious deviation of the actual value from the forecast. The unemployment rate for July is also unlikely to interest market participants.


Nevertheless, it is impossible to deny the full significance of these data. It means that you can not ignore them. ECB Board member Jens Weidmann will also give a speech on this day. It should be noted that representatives of the ECB have not spoken in public for a long time. It is especially true for Christine Lagarde. Therefore, each subsequent speech can give the markets important information for reflection, especially in the context of future changes in monetary policy, which we have not heard anything about for a long time. The EU will release the producer price index on Thursday, which is unlikely to be reflected on the charts. On Friday, the index of business activity in the EU services sector will be published, and the change in retail sales in July.


In general, this week's statistics (this is even without taking into account American statistics, which will be discussed in the article on the pound/dollar) can quite strongly affect the movement of the euro/dollar pair. There will be a lot of reports, and they will be quite important. But will the euro/dollar pair become more active at the same time? Recall that important reports and important fundamental events fall at the disposal of traders from time to time. But the volatility remains minimal at the same time.


The volatility of the euro/dollar currency pair as of August 31 is 43 points and is characterized as "low." Thus, we expect the pair to move today between the levels of 1.1754 and 1.1840. The upward reversal of the Heiken Ashi indicator signals the resumption of the upward movement.


Nearest support levels: S1 – 1.1780 S2 – 1.1749 S3 – 1.1719 

Nearest resistance levels: R1 – 1.1810 R2 – 1.1841 R3 – 1.1871


Trading recommendations:


The EUR/USD pair continues its weak upward movement. Thus, today, you should stay in long positions (or open new ones) with targets of 1.1810 and 1.1840 after the Heiken Ashi indicator turns up. Sales of the pair will be possible if the pair is fixed back below the moving average line with targets of 1.1719 and 1.1688, and they should be kept open until the Heiken Ashi indicator turns up.