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EURUSD: resistance at 1.1735

Previous:

On Monday the 30th of July, trading on the euro closed up. The euro rose against the dollar to 1.1719. The key driver behind the euro’s recovery was the universal decline of the greenback. As trading got underway in Europe, the dollar took a dive despite a rise in US10Y bond yields.

Market participants may be selling them off ahead of the conclusion of the Fed’s meeting on Wednesday. We can’t rule out the possibility that given the current situation, people may be taking up positions against the dollar, fearing that the Fed won’t raise interest rates another 2 times this year. The Fed’s accompanying statement should shed some light on this issue.

Day’s news (GMT 3):

  • 09:00 Germany: retail sales (Jun).
  • 09:30 Japan: BoJ press conference.
  • 09:45 France: CPI (Jul).
  • 10:55 Germany: unemployment rate (Jul), unemployment change (Jul).
  • 12:00 Eurozone: GDP (Q2), unemployment rate (Jun), CPI (Jul).
  • 15:30 Canada: GDP (May), industrial product price (Jun).
  • 15:30 US: core personal consumption expenditure – price index (Jun), personal income (Jun), personal spending (Jun).
  • 16:00 US: S&P/Case-Shiller home price indices (May).
  • 16:45 US: Chicago PMI (Jul).
  • 23:30 US: API weekly crude oil stock.

Fig 1. EURUSD hourly chart. Source: TradingView

Current situation:

My target in yesterday’s forecast (1.1682) was reached. After breaking this level, I set a new target of 1.1735. As expected, the 67th degree was broken on the back of rising euro crosses. The euro rose to 1.1719. Traders may have been dumping the dollar ahead of the FOMC meeting.

On Tuesday the 31st of July, Eurozone GDP data is being released, which should give an idea of the current state of the economy. Today we’ll also get preliminary consumer inflation figures for the Eurozone in July.

I thought that buyers would be able to reach the upper boundary of the range at 1.1735 without the need for a correction. My forecast has the euro rising to this level, but given the wave structure we have, I’m not confident that it’ll turn out exactly this way.

If we consider the possibility that prices will rise as part of a 5-wave pattern (normally I don’t look at Elliot waves), then the target of 1.1640/45 is realistic. If the euro first drops to 1.1680, then it would be better to refrain from selling at 1.1730 – 1.1735. In this case, we should prepare for the price to exit the range of 1.1635 – 1.1735.

Today’s economic calendar is rich. Remember that there are several key events this week, with interest rate decisions from the Bank of Japan, Bank of England, and Federal Reserve, and July’s NFP report.

The FOMC’s two-day meeting will conclude on Wednesday. The key rate is expected to be left unchanged. Traders will be listening out for any information on future rate hikes, nothing else matters to them at the moment.

The Bank of England will announce its interest rate decision on Thursday. The consensus is that the key rate will be increased by 0.25%. Although this hike is already factored into prices, traders can buy the pound against the euro until Thursday. Traders will start to take profit after the meeting. The euro crosses will be under pressure this whole time.



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