EUR / USD – 4 H.
On October 4, the EUR / USD pair on the 4-hour chart consolidated above the correction level of 100.0% – 1.1106 and increased to the level peak of August 26 – 1.1164. The reason for the new growth of the Euro currency lies solely in the Fed meeting. The results of which were announced last night. That is, it was the information background that became the basis for the growth of the EU currency. Now, when the Fed and ECB meeting is behind, bull traders have to prove their strength and desire to continue to push the euro-dollar pair up. Meanwhile, quotes from the level of 1.1164 will work in favor of the US dollar and the beginning of the decline in the direction of the Fibo level of 100.0% – 1.1106. In turn, rising divergence is not observed today.
The third consecutive reduction in the Fed’s key rate took place, chairman Jerome Powell said yesterday. At the same time, many traders agree that the Fed will now take a break, although there were no concrete hints in this in yesterday’s speech by Jerome Powell. He stated that the adjustment of the key rate after a cycle of systematic increases was completed, but this does not mean that it will not be lowered again at the next or one meeting. Thus, everything will depend on economic reports, the state of the US economy and the global economy, the escalation or de-escalation of the trade conflict between China and the USA, as well as inflation and the labor market. As you can see, there are a lot of factors that the Fed will take into account at future meetings, and Jerome Powell’s wording and rhetoric, in principle, is repeated from meeting to meeting. However, there is another factor which Jerome Powell doesn’t like to talk about, but he still has a place. This is the President of the United States of America, Donald Trump, who continues to criticize the Fed, believe that the rate is too high, which inhibits US economic growth. And that is precisely the main disagreement between Trump and Powell. Trump needs a cheap dollar, economic growth, a victory in a trade war with China, and all this as quickly as possible, since the presidential election in America will be held in less than a year. Moreover, Trump really wants to be re-elected for a second term while Powell is more interested in inflation, which is stably below the target of 2.0% and the state of the labor market. At each meeting, Powell says that he is “moderate” about economic growth, and it seems that the Fed is completely satisfied with this. This time, by the way, Donald Trump refrained from criticizing Jerome Powell, however, it is unlikely that the latter will avoid it in the future, since Trump wants to see the rates at zero or “even lower”.
In just an hour, preliminary data on GDP for the third quarter and inflation for October will be released in the European Union. Let me remind you that US GDP unexpectedly significantly exceeded the expectations of the market (also by preliminary value), and inflation remains much higher than European. If the Fed also takes a break and stops lowering the rate, which is very likely, then the euro currency with its weak reports may become very difficult to compete with the US dollar again.
What to expect today from the euro-dollar currency pair?
On October 31, traders will have to solve the problem with the level of 1.1164. If bull traders sell this level, which is also the previous local peak, then the probability of continued growth will increase. Quotes, in turn, rebound from the level of 1.1164 will work in favor of the US currency. Much will depend on reports from the eurozone and there is little chance that they will be positive.
The Fibo grid was built at the extremes of May 23, 2019 and June 25, 2019.
Forecast on EUR / USD and recommendations to traders:
I recommend selling the pair with a target of 1.1024 if closing is completed at the level of 1.1106 (100.0% Fibonacci). Stop Loss – Above 1.1106.
I recommend buying a pair with a target of 1.1232 and a Stop Loss level of 1.1164 if closing is performed above the level of 1.1164.