After a 3-day ascend, the EURUSD slid lower during the first half of Wednesday but eventually rebounded and closed the day in the positive territory making it a 4-day streak of gains. At the time of analysis, the price is testing 2 critical resistance levels, the 20 day moving average, as well as the upper resistance line of a falling wedge. Ahead of the Jackson Hole Symposium and the Fed Chair speech on Friday, traders are no doubt monitoring this pair closely from the sidelines.
All Eyes on Jackson Hole Symposium
Key data released on Wednesday include the US Durable Goods Orders, which decreased at a slower pace than the market expectation. The Durable Goods Orders, released by the US Census Bureau, measures the cost of orders received by manufacturers for durable goods planned to last for at least three years, such as motor vehicles and appliances. The figure was better than anticipated as it only declined 0.1% in July as compared to forecast of a 0.5% decline. The core figure was also upbeat with a monthly increase of 0.7%, from 0.6% in the month prior. Despite the positive data for US dollar, EURUSD managed to edge higher.
The greenback’s strength against the Euro faded towards the end of the trading day with the US Dollar Index (DXY) retreating below 93 after hitting an intraday high of 93.12. The DXY then lost its momentum with investors now eagerly anticipating FOMC Chairman Jerome Powell’s speech at the Jackson Hole Symposium.
The Jackson Hole Symposium will be held virtually on Friday as it gathers the world’s most powerful central bankers to discuss on economic issues and policies. As the annual conference is traditionally held in Jackson Hole, Wyoming, the last minute shift to holding it online leads market to suspect that the Fed is still seeing the Delta variant as a major concern and would be unlikely to announce a tapering roadmap in this highly anticipated event.
The Delta variant continues to threaten economies worldwide and it tends to benefit the safe haven US dollar.
On the other hand, the ECB Monetary Policy Meeting Accounts for July which is due to release this evening, is likely to reflect a dovish forward guidance as the Governing Council braces for a “transitory period in which inflation is moderately above target”. Diverging tones between the dovish ECB and hawkish Fed continues to weigh on EURUSD.
Momentum remains bearish for EURUSD with the MACD in negative territory and RSI below 50. EURUSD is seen travelling down a falling wedge since 1st June. In order to validate the falling wedge as a reversal pattern, the pair needs to break the upper resistance line and have a daily close above 1.1780. In extension to 1.1780, 1.18 psychological level will be a formidable resistance to watch.
In the event where the pair slides from here, March low of 1.1704 would serve as a strong support. If the pair pierces below this level, it will be headed to test November 2020 low at 1.162.
Key events to watch in the coming week:
Friday, Aug 27
USD – Personal Spending (Jul), Core Personal Consumption Expenditures – Price Index (YoY) (Jul), Jackson Hole Symposium, Fed’s Chair Powell speech
Monday, August 30
EUR – Consumer Confidence (Aug), Industrial Confidence (Aug), Business Climate (Aug), Germany Harmonized Index of Consumer Prices (YoY) (Aug), Pending Home Sales (MoM) (Jul)
Tuesday, August 31
- EUR – Consumer Price index (YoY)(Aug)
- USD – Housing Price Index (MoM)(Jun), Chicago Purchasing Managers’ Index (Aug), Consumer Confidence (Aug)
Wednesday, September 1
- EUR – Germany Retail Sales (YoY) (Jul), Markit Manufacturing PMI (Aug) for Spain, Italy and Germany, Unemployment Rate (Jul)
- USD – ADP Employment Change (Aug), Markit Manufacturing PMI (Aug)
Thursday, September 2
USD – Nonfarm Productivity (Q2), ISM Manufacturing PMI (Aug)
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