Technical Analysis of EUR/USD for July 14, 2020:
The EUR/USD pair has moved higher again and finally broke above the supply zone located between the levels of 1.1347 - 1.1361. Another Bearish Engulfing candlestick pattern has been made at the breakout, but bulls are not giving up. This is the fifth attempt to rally above the supply zone located between the levels of 1.1347 - 1.1361 has been capped. Despite those two indications of a possible down trend in progress, the bears must try harder and increase the momentum in order to control the market. Negative momentum supports the short-term bearish outlook.
On the EUR/USD pair, the main long-term trend is down, but the local up trend continues. The key long-term technical support is seen at the level of 1.0336 and the key long-term technical resistance is seen at the level of 1.1540. Only if one of this levels is clearly violated, the main trend might reverse (1.1540) or accelerate (1.0336).
Technical Analysis of GBP/USD for July 14, 2020:
The GBP/USD pair has made a Double Top price pattern at the level of 1.2668. Moreover, there is a Bearish Engulfing pattern made at the top of the rally as well, so the indication of the reversal is strong. The bears have managed to push the prices towards the level of 1.2542 already and this level is the key short-term technical support for the market. The momentum is weak and negative, so the next target for bears is seen at the level of 1.2484 - 1.2466.
On the GBP/USD pair the main trend is down, which can be confirmed by the down candles on the weekly time frame chart. The key long-term technical support has been recently violated (1.1983) and the new one is seen at the level of 1.1404. The key long-term technical resistance is seen at the level of 1.3518. Only if one of these levels is clearly violated, the main trend might reverse (1.3518) or accelerate (1.1404). The market might have done a Double Top pattern at the level of 1.2645, so the price might move even lower in the longer-term.
Indicator analysis. Daily review on EUR / USD for July 14, 2020
The pair traded upward on Monday and once again failed to break the resistance line 1.1369 (white bold line). Today, the price may begin to move downward. Economic calendar news for the euro is expected at 09:00 UTC, and for the dollar at 12:30 UTC.
Trend analysis (Fig. 1).
Today, a downward pullback is possible from the level of 1.1344 (closing of yesterday's candle) with the target of 1.1297 - a 38.2% pullback level (blue dotted line). There is a possibility that the price will continue to move down from this level, with the next target of 1.1273 - a 50.0% pullback level (blue dashed line).
Fig. 1 (daily chart).
Comprehensive analysis:
- Indicator analysis - down;
- Fibonacci levels - down;
- Volumes - down;
- Candlestick analysis - down;
- Trend analysis - down;
- Bollinger Lines - down;
- Weekly schedule - down.
General conclusion:
Today, the price may begin to move downward from the level of 1.1344 (closing of yesterday's candle) with the target of 1.1297 - a 38.2% pullback level (blue dotted line). There is a possibility that the price will continue to move downward from this level, with the next target of 1.1271 - a 50.0% pullback level (blue dashed line).
Another possible scenario is an upward trend from the level of 1.1344 (closing of yesterday's candle) with the target at the upper fractal 1.1376 (blue dashed line). Upon reaching this level, the upward trend may continue with the next target of the next upper fractal 1.1423.
Indicator analysis. Daily review on GBP / USD for July 14, 2020
On Monday, the pair was not able to break the 76.4% pullback level (blue dashed line) for the third time. It went on a downward pullback and managed to broke through the pullback level 23.6% at 1.2572 (red dotted line). Today, the downward movement may continue. Economic calendar news for the pound is expected at 06:00 UTC, and for the dollar at 12:30 UTC.
Today, the downward trend may continue from the level of 1.2555 (closing of yesterday's candle) with the target of 1.2511 - a 38.2% pullback level (red dashed line). From this level, the downward trend may continue with the next target of 1.2461 - a 50% pullback level (red dashed line).
- Trend analysis - up;
- Bollinger Lines - up;
Today, the price may continue to move downward with the target of 1.2511 - a 38.2% pullback level (red dashed line). From this level, the downward trend may continue with the next target of 1.2461 - a 50% pullback level (red dashed line).
Another possible scenario is an upward trend upon reaching 1.2511 - a 38.2% pullback level (blue dashed line) with a target of 1.2599 - a 61.8% pullback level (blue dashed line).
Investors' tiredness from COVID-19 issue supports the euro and pressures the dollar (EUR/USD and GBP/USD pairs have a chance
The dollar remains under pressure against major currencies, despite increasing cases and deaths in the United States. On the one hand, the market is simply tired of this endless coronavirus drama, and on the other, it continues to realize that the US economy is slowly recovering, and the corporate reporting season for the second quarter may bring surprises, which in turn can become the basis for a summer rally in the markets stocks.
Important economic data was not published on Monday, so market players focused entirely on the reporting season, which became the basis for the growth in demand for risky assets with the simultaneous sale of protective assets, which include the US dollar.
Today, the attention of the market will be focused on the publication of data on employment in the British economy, on the values of production indicators and their volumes in the same Britain, USA and in the eurozone. In addition, figures on consumer inflation in Germany and the United States will also attract attention. The day will also be full of speeches by Fed members Brainard and Bullard. And, of course, investors will turn their attention to the published values of crude oil and petroleum products from the American Petroleum Institute (API). The presented data on the volume of exports, imports and the trade balance of China turned out to be ambiguous, but logical in the current difficult conditions. The volume of exports and imports grew by 0.5% and 2.7%, respectively, against the expected decline. However, the balance let us down, amounting to only 46.42 billion dollars in June against the forecast of 58.
Positive values of production indicators and economic sentiment indices in the eurozone and in Germany will continue to stimulate investor's interest in buying shares of companies, which in turn will force them to close long positions in the US currency.
But the market will also monitor the situation with the COVID-19 pandemic, not forgetting about the important events of this week, which include the EU summit on the Recovery Fund in the first place. At the moment, this is the most important factor supporting a positive mood in Europe. Along with an increase in demand for risky assets, it supports the single currency exchange rate, and with it the British sterling, which is growing on the hopes of a faster recovery of the British economy and the removal of the main negative for it – the topic of Brexit.
It is likely that amid general positive background, the euro and pound will continue to smoothly pull upwards, and reaching agreements on the Recovery Fund will only consolidate their growth and open the way for them to further increase locally.
Forecast of the day:
The EUR/USD pair is consolidating below 1.1350 in anticipation of the publication of important data on the eurozone and Germany, which will be released today. If they do not turn out to be worse than forecasts, the pair may continue to rise to the level of 1.1420.
The GBP/USD as well as EUR/USD is trading in anticipation of the release of important economic statistics. If they are above forecasts, then the pair will resume an upward trend and rush to the level 1.2700. But, if they are weaker, a breakthrough of the level of 1.2530 and a correction of the price to 1.2485 are expected.
Control zones for GBPUSD on 07/14/2020
The upward model on the pair remains a medium-term momentum, however, yesterday there was a fall, which allowed us to form a pattern of "absorption" of the daily level. The probability of forming a correction model has increased to 70%. The target of the downward movement may be the WCZ 1/2 1.2453-1.2432. The test of this zone will allow you to get the most favorable prices for the purchase of the instrument.
Working within the framework of the correction model allows you to consider sales with a quick fix and transfer to breakeven after updating the daily extremes.
An alternative model will be developed if the closing of today's trading occurs above yesterday's opening level. There will be a cancellation of the option of a deep correction and purchases will again come to the fore. This model should be considered along with the correction model.
Daily control zone. A zone formed by important data from the futures market that changes several times a year.
Weekly control zone. The zone formed by important marks of the futures market, which change several times a year.
Monthly control zone. A zone that reflects the average volatility over the past year.
Businesses between the UK and the EU may be disrupted in the short-term
The government warns that the results of the ongoing negotiations on Brexit will not lead to major changes in trade with the EU, for which businesses should prepare.
The customs declarations are complex. They occupy as many as 208 pages of government guidelines for imports and exports, which will take effect after the end of the transition period at the end of this year.
It is very detailed and represents a complex checklist of firms that want to be prepared for the most significant changes in doing business with their largest and closest partner.
The government recommends that companies hire an intermediary, such as a customs agent or forwarder, to help them navigate the new requirements, or they can buy special software to access HMRC systems if they want to do it themselves.
Other requirements include filing an application for the registration and identification number of an economic operator, ensuring that carriers have rights to obtain a driver's license, and that their VAT accounting processes are ready for import into the EU.
Cabinet Minister Michael Gove said on Monday that the UK's departure from the EU "opens up many new opportunities for expanding trade with the rest of the world."
But the negotiations on a trade agreement with the United States encountered an obstacle in relation to food standards and animal welfare.
Relations with China, meanwhile, became tense in connection with the proposal to the British government to provide British citizenship for 3.5 million people in Hong Kong.
Such factors made many ministers admit that in the short term, the flow of business between the UK and the EU will be disrupted, but this price is worth paying for to be able to control their own borders, laws and money.
Thus, the tone of today's advice is clear, but many firms will check the compliance process. From the 200 pages of detailed instructions, it is also clear that any hope of less paperwork and red tape after Brexit is very unlikely.
Today's test of the Weekly Control Zone 1/2 0.6523-0.6516 gave an opportunity to enter the purchase, however, it is important to note that the probability of a sharp increase and renewal of the weekly maximum is reduced due to the formation of the "absorption" pattern of the daily level. Now, the pair is trading within the local accumulation zone, so the purchase of the instrument is of a medium-term nature.
A short-term price hold within the flat is most likely in the current situation. A repeated breakdown of the local minimum of the week is also likely, which will allow you to get a "false breakdown" pattern.
An alternative pattern will be developed if today's closing of American session occurs below the Weekly Control Zone 1/2. This will open the way for the pair to begin to decline. The target of the bearish impulse will be the weekly control zone 0.6448-0.6433. Today, sales are not yet profitable, so the continuation of the decline is considered only for the subject of reaction to the Weekly Control Zone 1/2.
Daily CZ - daily control zone. The zone formed by important data from the futures market that changes several times a year.
Weekly CZ - weekly control zone. The zone formed by the important marks of the futures market, which change several times a year.
Monthly CZ - monthly control zone. The zone that reflects the average volatility over the past year.
Elliott wave analysis of GBP/JPY for July 14, 2020
GBP/JPY fell a bit lower than we expected. The question is whether a deeper correction is needed before the next impulsive rally occurs or short-term key-support at 134.26 will be able to protect the downside for a rally above short-term key-resistance at 135.92 and higher to 139.74.
A break below key-support at 134.26 will call for a corrective decline towards at least 133.62 before rising again.
R3: 136.11
Pivot: 134.73
S1: 134.26
Trading recommendation:
Our long GBP position from 132.85 was stopped out at 134.40 for a profit of 155 pips. We will re-buy GBP at 133.70 or upon a break above 135.37.
Elliott wave analysis of EUR/JPY for July 14, 2020
EUR/JPY is again testing short-term resistance at 121.96 which is expected to cap the upside for a break below 121.09 indicating renewed downside pressure towards 119.26 and 118.23 and maybe even closer to 117.00.
A break above 121.96 will change the preferred outlook back to the former bullish count. Therefore, the pair may return to the peak at 124.32 and higher.
We sold EUR at 121.35 and we have placed our stop at 122.00
GBP/USD: plan for the European session on July 14. COT reports (analysis of yesterday's trade). Good news for the pound is
To open long positions on GBP/USD, you need:
Yesterday, sellers of the pound were happy with a double top forming in the resistance area of 1.2666, where the first sell signal for GBP/USD was also formed, which I spoke about in detail in my forecast for the second half of the day. Also, if you look at the 5-minute chart, you will see how the bears took advantage of the moment and consolidated below the support of 1.2619, forming an additional entry point into short positions from it, which led to updating the low of 1.2569. In the Commitment of Traders (COT) report for July 7, another increase in short and long positions was recorded, which indicates a confrontation between buyers and sellers. However, there were many more bulls than sellers, which led to a decrease in the net position. This does not mean that the market has become bullish, as there is still a fairly high probability of the pound declining further against the background of Brexit uncertainty and other economic problems. The COT report indicates that short non-commercial positions increased from the level of 55,414 to the level of 56,300 during the week. Long non-commercial positions rose from the level of 34,424 to the level of 39,892. As a result, the non-commercial net position decreased its negative value to -16,408, against -20,990, which indicates that the pressure in the market remains after the unsuccessful attempt of the bulls to continue the upward trend. As for the current situation, buyers urgently need to return to the resistance of 1.2564, since only then can we expect a second attempt to grow to the level of 1.2615, where I recommend taking profits. A test of the high of 1.2666 will indicate a new bullish momentum that will be able to update the level of 1.2742. If the pressure on the pound persists in the first half of the day, it is best to count on a false breakout to form in the support area of 1.2511, since only then will it be possible to open long positions. A larger area where you can buy GBP/USD immediately on the rebound will be the low of 1.2448.
To open short positions on GBP/USD, you need:
Sellers of the pound will be waiting for today's reports on UK GDP and industrial production. Poor indicators will only increase the pressure on the pair. Bears need to pay attention to protecting the 1.2564 resistance, since forming a false breakout there will be the first signal to open short positions in continuing the downward trend formed at the beginning of this week. The goal will be to test the support of 1.2511, consolidating under it will only increase the pressure on GBP/USD and pull down the pair to the low of 1.2448, where I recommend taking profits. If there is no activity on the part of sellers at the level of 1.2564 and fundamental data turns out to be good, then the bears' position could weaken. In this case, I advise you to postpone sales until the test of a larger resistance of 1.2615, and also to open short positions immediately for a rebound from the weekly high of 1.2666, counting on a correction of 30-40 points within the day.
Trading is conducted below 30 and 50 moving averages, which indicates that the market remains under the control of sellers.
Note: the period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
A break in the lower border of the indicator at 1.2515 will increase the pressure on the pound. Growth will be limited by the upper level of the indicator in the area of 1.2630.
MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Fast EMA period 12. Slow EMA period to 26. SMA period 9
Non-commercial traders are speculators, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
The total non-commercial net position is the difference between short and long positions of non-commercial traders.
GBP/USD forecast for July 14, 2020.
After the breakthrough and close below the previous day Low Cable, the GBP/USD pair may test the 1.2621 level. If the bullish momentum is strong enough then this pair will rise to the level of 1.2665 as its secondary target. This scenario is likely to occur if the GBP/USD does not decline and close bellow the 1.2515 level.
Instant Forecast For GBP/JPY For July 14, 2020
The GBP/JPY pair is now moving down in a down slope Pitchfork channel. It is now trying to raid the 134.26 as the first target. If the bearish momentum is strong, 133.90 will be the next target for this pair as long as GBP/JPY does not retrace upwards and closes above 135.46. If the pair crosses this level, the scenario to the downside will be automatically canceled.
Trading plan for EURUSD for July 14, 2020
Technical outlook:
EURUSD rallied through 1.1374 level yesterday before pulling back. The rally could be seen as the termination of counter trend since 1.1167. Looking into the wave structure, EURUSD had carved a bearish boundary between 1.1420 and 1.1167. The corrective rally was complex as it took some time to finally terminate around Fibonacci 0.786 yesterday. The single currency pair is seen to be trading around 1.1340 level at this point in writing. It is likely to continue its downward movement. The bearish structure discussed earlier remains in force until EURUSD stays below 1.1420 level. Trading point if view is to remain bearish with risk at 1.1420 for now. The downside potential is seen towards 1.1008 and 1.0754 respectively.
Trading plan:
Remain short, stop above 1.1420, target is 1.0754.
The pair has been trading within the medium-term accumulation zone for the sixth week. This requires using weekly extremes as the main levels for searching for entry and exit points from positions. Yesterday's test of the weekly CZ 1.1385-1.1367 enabled us to take part of the purchases. However, you need to be prepared for this until a pattern is formed for selling.
You will need to form a false breakout pattern of yesterday's high to enter the sale. The target of the downward movement will be the WCZ 1/2 1.1284-1.1275.
An alternative model for sustaining growth will develop if the closing of today's trading occurs above the weekly CZ. This will allow you to keep some of the purchases opened last week. It is important to understand that growth is still a long-term momentum, so the probability of a retest of the previous month's peak is higher than 70%.
Daily CZ - daily control zone. The area formed by important data from the futures market, which changes several times a year.
Weekly CZ - weekly control zone. The zone formed by important marks of the futures market, which changes several times a year.
Monthly CZ - monthly control zone. The zone, which is a reflection of the average volatility over the past year.
Control zones for AUDUSD on July 14, 2020
The downward movement from yesterday's US session made it possible for us to approach the WCZ 1/2 0.6912-0.6903. The test of this zone will be decisive for the upward movement, since the bullish momentum is not 100% realized. The test of WCZ 1/2 should be considered when searching for a pattern to buy the instrument.
Working within the flat implies a partial exit from the position at the borders of the flat. The pair's growth will also lead to a test of the upper limit of the flat, where the probability of a large offer will increase.
To exit the flat, you will need to pin the pair above or below one of the control zones. This will allow us to consider forming a new impulse. The upper limit of the flat is the weekly CZ of 0.7032-0.7014. Consolidating above this zone will open the way for continuing the long-term bullish momentum.
Forecast for AUD/USD on July 14, 2020
The Australian dollar fell for the third consecutive day on Monday. Even if it's a little, but the triple divergence on the Marlin oscillator is at risk on the daily chart. The signal line of the oscillator is now in the negative zone, a further decline in the price below the level of 0.6900 may lead to a further fall to 0.6745 and possibly develop a medium-term decline (0.6600 and below).
An exit of the price above the signal level of 0.7000, which is marked on the four-hour chart, can prevent the development of a downward movement. In this case, the triple divergence on Marlin will continue to form and the targets 0.7080 and 0.7190-0.7225 will open before the price. Pulling down the price below the target level of 0.6900 opens the target of 0.6745. But first, the price needs to get a foothold under the MACD line on H4, that is, below yesterday's low.
Forecast for USD/JPY on July 14, 2020
The USD/JPY pair rebounded in growth on Monday, adding 40 points. But the growth was late (the yen strengthened all week amid horizontal movement of stock indexes), or, more precisely, out of place, as the US stock market ended yesterday by falling: S&P 500 -0.94%, Nasdaq -2.13%, only the Dow Jones was in the black by a symbolic 0.04%. Asian indexes are also falling today: Nikkei 225 -1.05%, China A50 -0.80%, Kospi SEU -0.55%.
The price showed a reversal from the MACD line (blue indicator) on the daily chart, but it was broken through by a deep lower shadow last Friday, which is a sign of the falsity of the subsequent upward movement, that is, growth on Monday. Accordingly, the most likely scenario for further development of events will be for the price to return under the MACD line and its decline to the lower line of the price channel to the level of 105.70. The price needs to go above the nearest target level of 107.77 for further growth – the goals of 108.38 and 108.95 are sequentially opened.
The MACD line stopped yesterday's price growth on the four-hour chart. The price also failed to go over the red balance indicator line, that is, the growth occurred within the speculative framework of a downward trend. A further decline in the price below the signal level of 106.95 will correspond to the price leaving the area under the MACD line on the daily scale. After that, we wait for the price at 105.70.
Hot forecast and trading signals for the GBP/USD pair on July 14. COT report. Buyers gave the initiative into the hands of
GBP/USD 1H
The GBP/USD currency pair also settled below the ascending channel on the first trading day of the week, which means that the trend has changed to a downward one. In addition, the pair's quotes are also pinned below the critical Kijun-sen line, so we can say that the sellers of the British pound have much more clearly defined their position than the sellers of the euro, who failed to develop their success. The bulls never managed to overcome the resistance area of 1.2668–1.2688, and three attempts were made. Thus, we now expect a new downward trend to form, at least in the short term. The question is, will the bears have enough strength and fundamental grounds to start a powerful downward movement? As we have already said, the fundamental backgrounds of the euro/dollar and the pound/dollar are different.
GBP/USD 15M
Both linear regression channels turned down on the 15-minute timeframe, which means the beginning of a downward movement in the most short-term plan. Thus, two timeframes at once speak in favor of changing the trend to a downward one. As for the latest COT report, it turned out to be absolutely logical and reflects the essence of what is currently happening in the currency market for the pound/dollar pair. Professional traders opened 6,743 Buy-contracts and as many as 12 sell-contracts during the reporting week. Thus, the total net position in the commercial category immediately increased by 6,700. But the category of commercial market participants actively closed both Sell and Buy contracts. At the same time, Buy in much larger quantities. However, as we can see, this did not affect the overall strengthening of the British currency. Thus, the COT report speaks in favor of further strengthening the British currency. However, we remind you that any forecast based on a COT report must be confirmed (usually technical). At this time, the technical picture is such that it is more reasonable to expect a movement down.
The fundamental background for the GBP/USD pair did not change on the first trading day of the new week, as no fundamentally new and important information was available to traders on July 13. As we have already found out in the fundamental reviews, we should not expect traders to strongly react towards the US inflation report, and to reports on GDP and industrial production in the UK. But information continues to arrive about the balance of forces in the election race between Joe Biden and Donald Trump. We have already written that at the moment, Biden leads in the polls by 6-10% on average across all states in the US. But we also said that due to the peculiarities of the electoral system in America, the results of voting in the so-called "wavering" states will be of great importance. According to the latest information, the Democratic candidate is ahead of Trump in at least two of these states, which were won by Trump in 2016. We are talking about Florida and Texas. The situation in Arizona is also very controversial. It should be noted that these three states are "severely affected" by the coronavirus epidemic and many sociologists believe that the opinion of their residents can be very strongly influenced by the COVID-2019 pandemic, on a large scale, which many blame it on Trump, who initially did not attach much importance to it, and until recently even refused to wear a medical mask, thus not setting the right example to Americans.
There are two main scenarios as of July 14:
1) The bullish outlook dramatically worsened at the start of the new trading week. At this time, the pair's purchases are already impractical and not recommended, as there are several technical signals at once to complete the upward movement. Thus, we recommend returning to the purchase of the British pound no earlier than overcoming the resistance area 1.2668-1.2688. The goal in this case is the resistance level of 1.2791. Potential Take Profit in this case will be about 90 points.
2) For sellers, you are advised to trade lower for support with a support level of 1.2497 and Senkou Span B line (1.2422), since the Kijun-sen line is left behind. Today's reports on UK GDP and US inflation are unlikely to fundamentally change the mood of traders, however, do not lose sight of them. There may be surprises. Potential Take Profit range from 40 to 120 points.
Hot forecast and trading signals for the EUR/USD pair on July 14. COT report. Buyers have minimal advantage over sellers.
EUR/USD 1H
Buyers again actively traded the euro/dollar pair for an increase on the hourly timeframe on July 13. Despite the fact that the quotes were pinned below the ascending channel a day earlier, thus forming a signal for the end of the upward trend. However, during the past day, the bulls rushed to attack and brought the pair to the upper border of the 1.1200–1.1350 side channel. Formally, the upper limit of this channel was overcome, and even a weak upward trend has formed in the last two weeks, which was illustrated by the ascending channel, but we still can not say that the current movement with very frequent and deep corrections, first, can be called a trend, and secondly, is convenient. We are still inclined to the option that the bulls are not strong enough to develop a real trend, so we see corrections every day that match the size of the impulsive areas. Moreover, buyers retreated again after reaching the resistance level of 1.1366, so we now expect a new round of downward correction.
EUR/USD 15M
Both linear regression channels are directed upwards on a 15-minute timeframe, which clearly signals an upward trend in the most short-term plan. However, not overcoming the level of 1.1366 can pull down the quotes. The latest COT report from July 7 was quite boring. As usual, we are most interested in changes to contracts in the commercial category, which represents professional traders entering the foreign exchange market in order to make a profit. Speculators in the reporting week opened almost 6,000 Buy-contracts and only 1,700 Sell-contracts. Thus, the total net position for this category has increased by about 4,000, which, simply put, means an increase in the bullish mood of major players. However, do not forget that the COT report only shows changes that have already occurred, so it always requires confirmation as a forecasting tool. At this time, the technique indicates a high probability of going down. Or, at least, the weakness of the upward trend, which is extremely inconvenient to work with.
The fundamental background for the EUR/USD pair did not change at all on Monday, as no important reports were scheduled for the day. If we talk about the fundamental background from Europe, the most important event now is the summit scheduled for July 17-18, during which the issue of forming a 750 billion European economic recovery fund will be discussed again, on which the EU member states have accumulated a lot of disagreements, as well as on the budget for 2021–2027. As for ordinary reports and statistics, data on industrial production will be published in the European Union today, but it is unlikely for it to have a serious impact on the mood of market participants. In some ways, technique and foundation currently contradict each other, since there was a signal to end the upward trend when the quotes left the ascending channel. At the same time, the pair easily reached the previous local high of 1.1371 yesterday. Thus, before the EU summit, we believe that data on the number of daily diseases COVID-2019 in the US will be more important for market participants, rather than economic statistics.
Based on the foregoing, we have two trading ideas for July 14:
1) Buyers again returned the pair to the level of 1.1366, which was already reached last Thursday. And, like last Thursday, buyers can now put the initiative in the hands of bears for a short time. One way or another, but we do not expect the pair to continue growing right now, although formally overcoming the level of 1.1366 will allow us to open long positions with the target at the level of 1.1432. Potential Take Profit in this case is about 60 points.
2) The bears seemed to be able to seize the initiative at the end of last week, but they failed to gain a foothold below the Senkou Span B line and buyers returned to dominate. Now, sellers need to wait for a new chance in the form of consolidating the pair below the Kijun-sen line (1.1314), which will make it possible to sell the euro with goals Senkou Span B line (1.1265) and the support level of 1.1238. Potential Take Profit in this case is from 40 to 70 points.
USD: chance of growth remains
The new week is very full of macroeconomic publications, including for the US. Traders are waiting for data on retail sales, which most likely increased on the restart of the economy. At the same time, consumer sentiment may have suffered due to the recent tightening of quarantine measures.
The pandemic and the response from the US government will remain as the main driver of the currency market. The number of cases of coronavirus in the United States rose again over the weekend. Only Florida reported an increase of more than 15,000 per day. This is a record for any state, and it exceeded the peak level in April in New York.
The World Health Organization has warned that the coronavirus pandemic could get even worse if all countries do not comply with basic health precautions. "Too many countries are moving in the wrong direction," Director General Tedros Adhanom Ghebreyesus said at a virtual WHO briefing in Geneva.
According to Reuters, on Monday, the number of infected people in the world exceeded 13 million people, in just five days, the pandemic has claimed the lives of more than half a million people.
Meanwhile, the dollar is losing for the fourth consecutive week. The greenback sharply fell by 0.3% against a basket of competitors on Monday evening. Investors continue to bet that the worst of the pandemic is already over and buy risky assets. Most market players are waiting for the continuation of the broad fall of the dollar.
Today, traders also paid attention to the joint statement of the German biotech company BioNTech and the American pharmaceutical giant Pfizer. Two experimental vaccines against COVID-19 received accelerated review status.
However, the protective functions of the US currency may still prevail. It is not just the deterioration of the epidemiological situation that will slow down the pace of economic recovery. Relations between the US and China are gradually heating up. The day before, US President Donald Trump said that he was not even thinking about negotiations on the second phase of the trade deal, as the countries' relations were seriously damaged due to the situation with the coronavirus. This gave investors new ground to think about. Now they believe that the fragile trade truce that was signed earlier will fall apart before the end of the year. The prospect of a trade war may be the main fundamental trigger for the long-term growth of the US dollar.
Traders need to monitor the level of 95.70 on the dollar index. While it is trading higher, the dollar bulls have more chances to maintain the initiative.
If the macroeconomic environment deteriorates, the Federal Reserve, as promised, will resort to additional stimulus measures. New volumes of liquidity will appear on the market, which in the recent past have already provoked a sell-off of the dollar.
Now the interbank market in London and New York is experiencing a negative situation for the US currency. In London, the three-month Libor rate updated its low for the last four years and came close to the upper limit of the Fed's rate range – 0.25%. This suggests that European banks do not feel a shortage of dollars.
In New York, the regulator canceled REPO auctions, as there were no requests for refinancing from commercial banks. There is a lot of money, and bankers do not have problems with dollar liquidity.
Overview of the GBP/USD pair. July 14. China is imposing retaliatory sanctions against the US. The British pound continues
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 32.9645
The British pound spent the first trading day of the new week in a new round of corrective movement. Buyers did not find the strength, and in the news feed – the reasons to continue buying the British currency and selling the dollar. However, this does not mean that the upward trend is complete. At the moment, the pound has fallen by only a few dozen points and failed to work out even the moving average line, which is considered the main goal in the "linear regression channels" system for all corrections. Thus, the upward movement may resume on Tuesday. Recall that the main helper of the British currency is now America. It is the current situation across the ocean that does not allow traders to buy the US currency. First of all, we are referring to the "coronavirus" epidemic, which does not abate at all and only acquires new and new scales. In the second place, we are talking about the confrontation between China and the United States, which is still flaring up. There are a huge number of contentious issues between Beijing and Washington, so it is not worth expecting to establish relations in the coming months. Plus, we should not forget that China is not a fan of the current US President and is waiting for a change of power in the country to have a dialogue with the new President, who is most likely to be Joe Biden, who has always been favorable and friendly to China. Third, we are talking about a political crisis, about Donald Trump, whose ratings have declined significantly in 2020, and the fans of his manner of doing business have noticeably decreased. These factors allow the British currency to strengthen so far. However, we will remind you once again that the British pound is unlikely to be able to go far on these factors. These factors are strong, however, the situation in the UK is no better. From 2021, British businesses will have to trade with EU countries under WTO rules, that is, with tariffs, quotas and duties. Brexit will be "tough", which the UK Parliament fought against for three years, and the British are likely to expect higher taxes and fees since somehow the UK government will need to patch the holes in the budget that caused the "coronavirus crisis" and Brexit. Thus, the welfare of British people is likely to continue to deteriorate in the coming years. And with it, attitudes toward conservatives may begin to deteriorate...
Meanwhile, the theme of the China-US confrontation has developed. As it became known on Monday, Beijing responded to Washington's sanctions, which it imposed earlier because of the oppression of Uighurs in the Xinjiang region. China has decided to impose mirror measures against American officials, which will include several Republican senators, several other representatives of the US Congress, as well as the entire congressional Committee on relations with China. "This law deliberately distorts the human rights situation in Xinjiang, viciously discredits the policy of the Chinese government, violates the basic norms of international law and international relations, and is a gross interference in the internal affairs of the PRC. The Chinese government and people express strong indignation and strongly protest," the Chinese Foreign Ministry said in an official statement.
At the same time, former assistant to US President Steve Bannon in an interview with the British newspaper Sunday Mirror said that some employees of the laboratory in Wuhan have fled the country and are now cooperating with Western intelligence services. According to Bannon, lab workers in Wuhan, where the COVID-2019 virus was released, are presenting evidence of the Chinese Communist Party's guilt in the incident. Bannon also said that US intelligence, along with British intelligence, is thoroughly investigating the case and collecting evidence of China's guilt to prepare materials for the court case. It seems that the tension between the United States, Britain, and China continues to grow.
On the second trading day of the week in the UK, several fairly important macroeconomic publications are planned. First of all, we recommend paying attention to the GDP for May. It is expected to grow by 5%. On the one hand, this is a good figure, on the other - it still needs to be achieved, and against the background of losses a month earlier, 20.4% is a negligible recovery. Recall that it is the British economy that will suffer the greatest losses in 2020 among the EU countries. Therefore, +5% of GDP in May is unlikely to overwhelm the optimism of buyers of the pound. Moreover, the pound is now growing not due to statistics or "foundation" from the UK, but due to low demand for the US currency. Industrial production for May will also be published with a forecast of -20.9% y/y and +6% m/m. The same can be said about these figures. After the strongest cuts of all macroeconomic indicators in April, the currently expected gains look just like a small pullback, rather than the beginning of economic recovery. Thus, we believe that all these important data in conjunction with US inflation will be ignored by market participants, and the pair's movement will continue following technical factors and the overall fundamental background.
And the fundamental background for the British pound remains sharply negative. We believe that as soon as the situation in the US improves a little (if this happens), the British pound will immediately begin a new round of decline against the US currency. Too much pressure has now formed on the British economy and in recent years this pressure has not eased. And in 2021, it can only increase, as we have repeatedly said. The fact that the negotiations between the groups of David Frost and Michel Barnier failed is no longer of interest to market participants. Who is interested in learning about another failure and lack of progress? Thus, in principle, we can safely expect the moment when Boris Johnson will announce the termination of negotiations with Brussels, as he promised earlier.
As for other factors, both channels of linear regression are currently directed upwards, as is the moving average. Therefore, all trend indicators now indicate an upward trend. Based on this, we expect a move to the previous local maximum of about $ 1.28. Only the consolidation of quotes under the moving will allow us to consider the option of ending the upward trend.
The average volatility of the GBP/USD pair continues to remain stable and is currently 97 points per day. For the pound/dollar pair, this value is "average". On Tuesday, July 14, thus, we expect movement inside the channel, limited by the levels of 1.2506 and 1.2700. Turning the Heiken Ashi indicator upward will indicate a possible resumption of the upward movement.
The GBP/USD pair started a new round of downward correction on the 4-hour timeframe. Thus, today it is recommended to open new buy orders with the goals of 1.2695 and 1.2756, after the reversal of the Heiken Ashi indicator to the top. It is recommended to sell the pair after fixing quotes below the moving average with the first goals of 1.2512 and 1.2451.
Overview of the EUR/USD pair. July 14. The focus is once again the "coronavirus." Anthony Fauci is in conflict with Donald
CCI: 175.7121
For the EUR/USD pair, the first trading day of the week was held in absolutely familiar trading recently. The pair was still trading in the side channel, limited by the levels of 1.1200-1.1350, near its upper border. Quotes again approached the Murray level of "5/8"-1.1353, but at the moment it is still impossible to say that this level has been overcome, and now the pair is waiting for the formation of a new upward trend. The most interesting thing is that in recent weeks, a pronounced upward trend has formed inside the side channel. In other words, the pair does not trade from the lower border to the upper and Vice versa. It shows a long movement in one direction with very frequent and deep corrections. Thus, this time is still far from the most favorable for trading the euro/dollar.
On Monday, as is often the case, the calendar of macroeconomic events in Europe and the United States was completely empty. In principle, volatility during the day perfectly reflects the almost absent fundamental background. However, one topic does not give rest to investors and traders and does not allow the US currency to start growing again. Many believe that the US dollar is the world's number one currency. That is the currency that everyone buys when the world has another crisis. This is partly true. However, one remark must be made here. If at the same time the crisis in the United States themselves is also quite large, and in addition to the crisis there are a huge number of other problems, then the US dollar will no longer become more expensive, "because there is a coronavirus in the world". Recent weeks are a great confirmation of this, as the euro and pound are growing. The euro simply does not have any good fundamental reasons for strengthening, and the pound, according to all the canons of fundamental analysis, should move in any direction but not up. However, both currencies are growing quite confidently. And the reasons, as we have said more than once, should be sought exclusively in the United States. And one of the most likely causes is "coronavirus". As we have already said, Europe has managed to win a relative victory over the epidemic. At least the daily growth rates of diseases have fallen to their minimum values, which means that the number of people recovering is greater than those infected, therefore, the total number of patients is decreasing, and the burden on the health sector is also decreasing. In the United States, the opposite is true. The rate of disease growth is growing day by day and is beating all the anti-records. It is hardly necessary to list once again what the United States may face if the virus continues to spread, "as in a crowded minibus". It is obvious that sooner or later most of the US population will get sick. But even if we are talking about 20% of the entire population, it will mean the collapse of the medical system. Hospitals simply cannot cope with the influx of sick people who need hospitalization or ventilators. Not to mention that Americans are unlikely to run for work in the face of a national epidemic. What it can end up with, it's scary to imagine. The US government will of course pay unemployment benefits, otherwise, it will not be possible to avoid new rallies and protests, which will be far from the most peaceful. However, the national debt will continue to grow. Donald Trump is not afraid of this, but sooner or later this "bubble" will burst. And the bigger this "bubble", the stronger the "explosion".
The country's chief epidemiologist, Anthony Fauci, who spent several weeks in isolation and made no comment, said "the world is only at the very beginning of the COVID-2019 pandemic". "The virus will continue to spread if countries do not take countermeasures," Fauci said. Fauci also noted that "the situation with coronavirus in the United States is out of control". "The coronavirus will remain with us for a long time until we take effective containment measures and develop a vaccine," the epidemiologist concluded. What is remarkable is that Fauci made these terrible statements to an Italian newspaper, not to an American publication. We have already drawn attention to the fact that the country's chief virus expert has abruptly stopped commenting on the pandemic. Regarding the causes of the new COVID outbreak, Fauci said that "the country and some states were in a hurry to lift all restrictions and resume economic activity, which led to new infections."
Meanwhile, the White House, or better yet, Donald Trump personally, does not find a common language with Dr. Fauci. The country's chief epidemiologist has worked under six presidents, but (why aren't we surprised?) couldn't cooperate only with Trump. It is noted that the White House blames Fauci for many wrong statements. There is even a whole list of the scientist's sayings, which consists of excerpts from his previous interviews and comments. Sources close to Trump and Fauci claim that the President and the epidemiologist stopped communicating with each other a few weeks ago (just when Fauci abruptly disappeared from the air). At the same time, according to many publications and experts, the problem is not in the doctor's statements, but in the fact that these statements contradict the sayings of the US President. Fauci allowed himself to openly object to Trump, to disagree with his opinion. In response, Trump also began to criticize Fauci, saying that he made too many mistakes. However, as we can see, it is more likely that Trump can be accused of making too many mistakes on the issue of the pandemic. It is his underestimation that has led to more than 3 million people being infected in the United States. And from our point of view, such a confrontation with the country's chief epidemiologist will not benefit Trump. First, it's not Fauci who needs to be re-elected in November. Secondly, according to many sociologists, Americans trust Fauci's opinion more than Trump on issues of the pandemic (which is not surprising, given the number of "discouraging" statements by the leader of the nation). As a result, the United States continues to cause serious concerns, since it is not possible to stop the "coronavirus", but the "coronavirus" can calmly stop and paralyze the American economy.
Today, Germany is scheduled to publish the consumer price index for June and several reports from the ZEW Institute, reflecting the mood in the business environment. In the European Union today, the report on industrial production for May with a forecast of +14.5% m/m, and in the United States - inflation for June with a forecast of 0.6% y/y. However, in the current conditions, traders of the euro/dollar pair are unlikely to pay attention to this data. As we have already said, inflation is now completely uninteresting to traders, since its fall or too strong growth is a normal phenomenon for any crisis. Industrial production is an interesting report, but everything will depend on how much the real value and forecast differ.
The volatility of the euro/dollar currency pair as of July 14 is 79 points and is characterized as "average". We expect the pair to move between the levels of 1.1291 and 1.1449 today. A new reversal of the Heiken Ashi indicator downwards will signal a new round of downward movement within the side channel.
The EUR/USD pair continues to trade near the moving average line, inside a side channel with a slight upward slope. Thus, it is recommended to open long positions if traders manage to overcome the level of 1.1353, which is the approximate upper limit of the channel, with the goals of 1.1449 and 1.1475. It is recommended to open sell orders no earlier than the 1.1200 level with the goal of 1.1108.
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