Analysis and forecast for EUR/USD on August 21, 2020
Following the results of yesterday’s trading, the main currency pair slightly strengthened, closing Thursday’s session at 1.1859, which is very symbolic, given the strong technical level of 1.1860 and the previously broken resistance at 1.1863. The symbolism is that yesterday’s trading above 1.1860 was not closed by the bulls for the euro, one point was not enough. However, at the moment of writing, the pair continues to demonstrate upward dynamics and is trading near 1.1876. The fervor of dollar bulls, which was observed after the publication of the Fed minutes, yesterday cooled the initial applications for unemployment benefits in the US, which came out worse than the forecast of 925,000 and rose to 1 million 106 thousand applications.
No matter how the Federal Reserve tries to support the economy of the United States, the consequences of COVID-19 cannot pass without a trace. Although in Europe, not all is so well with a new type of coronavirus infection. In a number of European countries, the daily number of COVID-19 infections has increased dramatically, and restrictive measures are being reintroduced. For example, there were 1,700 cases of coronavirus in Germany yesterday. Against this background, the statements of the World Health Organization (WHO) that it is necessary to conduct early diagnostics look very ridiculous. This is the key to success in the fight against COVID-19. This is so clear, even to a schoolboy. Who does nothing but warn and frighten about the further spread of the pandemic. There is no real action from WHO to develop an effective coronavirus vaccine or to take any really important measures to prevent the spread of COVID-19. Here we can agree with US President Donald Trump, who criticized the World Health Organization for its inaction and inefficiency and refused to pay dues. However, nothing has changed significantly in the work of the department. As they say: WHO is still there, in lengthy statements and warnings.
If we return to the technical picture for the EUR/USD currency pair, the bulls on the instrument today need to make every effort to ensure that the upper shadow of the weekly candle is as short as possible and no reversal signal of the candle analysis appears. I believe that the weekly timeframe is the strongest in terms of processing emerging signals.
However, let’s go back to the daily schedule. It is very important for players to close trades above 1.1900, or even better, above the falsely broken resistance level of 1.1915. If they succeed, there is no doubt that the key resistance level of 1.1965 at the moment will be tested once again for a breakout. In favor of the euro bulls is the fact that they were able to return the quote above the Tenkan line of the Ichimoku indicator, and now its breakdown can be considered false. In order to return the pair to the downward dynamics, the bears need to lower the price under the Tenkan, then break through the strong and important level of 1.1800. As you can see, it was at 1.1804 that the pair received strong support yesterday and slightly compensated for losses incurred after the Fed minutes.
On the hourly chart, the quote yesterday returned above the 200 exponential moving average, and today, at the end of the review, it breaks 50 MA (blue) and 89 EMA (black). As can be clearly seen, a rollback was already given to the broken movings, after which it was possible to open long positions. If this happens again, when the euro/dollar falls into the price zone of 1.1875-1.1865, you can try to buy a pair, but it is better with small goals. I don’t think we should move our open positions to Monday.
Looking at the economic calendar, you can highlight the index of business activity in the manufacturing sector and the services sector, which will be published by the Eurozone, and a little later, the United States. Perhaps these statistics will somehow affect the course of trading.
The material has been provided by InstaForex Company – www.instaforex.com