EUR/USD – 4H.
As seen on the 4-hour chart, the EUR/USD pair continued to move inside the upper area of the downward trend channel and was able to break through the upper line of the channel only this morning and, thus, cast doubt on the further fall. However, it’s too early to “drink Borjomi”. So far, we are talking only about the breakdown of the upper line of the channel, which may well be false, and the pair will resume the fall. In any case, before the closing of the pair quotes above the Fibo level of 127.2% (1.1024), I would not take this growth of the European currency seriously. Today, the divergence is not observed in any indicator. The rebound of the pair from the correction level of 127.2% will work in favor of the US currency and the resumption of the fall.
It remains to understand what caused the growth of the euro on the morning of Thursday, September 10. No economic reports were released in the morning, and only one news came “to the market.” The message about the failure of negotiations between America and China on a trade agreement, which started just today, October 10, and was planned to last at least 2 days. However, the Chinese delegation is ready to leave Washington today, as the talks have not yielded any result. According to insider information, Chinese representatives refused to even hold a dialogue on technology transfer, which is one of the main claims of Washington. Also, the issue of subsidizing Chinese companies by the state was not raised, which, according to Trump, gives them an advantage over other competitors in international markets. Similar claims that Trump expressed and the European Union regarding the company Airbus. The dialogue was mainly about China’s purchase of agricultural products in America, as well as the protection of intellectual property. Beijing reportedly failed to convince Washington not to raise existing duties from 25% to 30%, and not to impose 15% duties on consumer goods from China totaling about $160 billion from December 15. Thus, the negotiating team led by Deputy Prime Minister Liu He is likely to return home today.
Based on the above, the fall of the US currency on Thursday morning could be due to failed negotiations, but earlier information about failures in the negotiation process bypassed the dollar. What has changed now, and is the growth of the euro related to the negotiations on the trade deal? It’s hard to say, but in any case, I do not expect strong growth of the European currency based on this factor alone.
In addition, the consumer price index for September will be released today in America, and this is a really important and interesting report. A slight increase in inflation is expected compared to August. And if it really will be (1.8% – 1.9% y/y), then bear traders can very quickly return to the market and lower the pair again.
What to expect from the euro/dollar currency pair today?
On October 10, traders continue to hold the euro/dollar pair in the key zone – near the upper line of the downward channel and the level of 127.2%. Closing quotes above the level of 12.7% will significantly increase the probability of continued growth of the pair, and the breakdown of the upper line of the channel will not be considered false. However, I am waiting for the US inflation report, which may change the mood of traders.
The Fibo grid is based on the extremes of May 23, 2019, and June 25, 2019.
Forecast for EUR/USD and trading recommendations:
I recommend selling the pair today with a target of 1.0802 if the close below 1.0918 is executed. A stop-loss order above the level of 1.0927.
It will be possible to buy the pair after closing above the downward trend channel and above the correction level of 127.2% with a target of 1.1106.