EURUSD: after a surge in volatility, a slide is on the cards

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On Monday, trading on the euro/dollar pair closed in the black. During Europe’s trading, the euro corrected downwards to 1.1723. The euro then surged to 1.1845 on the back of US data, which was mixed. Pending home sales grew while the Chicago PMI fell.

Most experts believe that the dollar’s collapse was brought about by the weak Chicago PMI data. Personally, I don’t think the data can be so significant as to induce a surge of more than 100 pips. Dollars were sold on the back of the news that Trump fired Anthony Scaramucci from the post of White House communications director after only 10 days in the role.

Investors started selling the dollar due to a lack of faith in the Trump administration. In the last week, both press secretary Sean Spicer and chief of staff Reince Priebus have left their posts. These events have strengthened gold and the yen.

US statistics:

• Chicago PMI: 58.9 (expected: 61.5, previous: 65.7).
• Pending home sales: +1.5% (expected: +1%).

Day’s news (GMT+3):

• 09:00 UK: Nationwide housing prices (Jul);
• 09:30 Australia: RBA commodity index SDR (Jul);
• 10:55 Germany: Markit manufacturing PMI (Jul), unemployment change (Jul);
• 11:00 Eurozone: Markit manufacturing PMI (Jul);
• 11:30 UK: Markit manufacturing PMI (Jul);
• 12:00 Eurozone: GDP (Q2);
• 15:30 USA: CPI core (Jun), consumer spending (Jun), personal income (Jun);
• 16:30 Canada: Markit manufacturing PMI (Jul);
• 16:45 USA: Markit manufacturing PMI (Jul);
• 17:00 USA: ISM manufacturing PMI (Jul), construction spending (Jun), ISM prices paid (Jul).

EURUSD rate on the hourly. Source: TradingView

On Monday, the rate didn’t make it as far as I’d expected. The downwards correction ended 8 pips away from the LB balance line at 1.1723. Fundamental factors have been dominating the market. During this time, technical signals haven’t been working at all. Trading volume was lower yesterday than it was on the 28^th of July.

Growth stopped at the U3 MA line (price receded 1% from LB). The 157^th degree runs through this point. In order to understand what to expect from the market on Tuesday, look at the dynamics of the euro on the 20^th, 21^st and 27^th of July.

Since the trend is bullish, before going into a correctional phase, buyers could hit a new nigh. If trading in Europe opens relatively calmly, and a new high isn’t reached within 2 hours, we can expect the euro to drop to the 45^th degree at 1.1791.

The speed of price movements and trading volume are very important indicators. Without them, there’s no way of understanding what’s happening at this or that level. Right now, with volume low on the market, the price is consolidating below the 157^th degree. Buyers won’t be able to go higher without accumulating some more positions. From here, we could see the price drop to 1.1807. If that level doesn’t hold, the way to 1.1791.