EUR/USD. September 15th. Preparing for key events

[Ben Graham]

On Friday, the EUR/USD pair consolidated ahead of a new and important week. Quotes remained throughout the day above the 76.4% retracement level at 1.1695, which preserves the prospects of growth toward the resistance zone at 1.1789–1.1802. Thus, on Monday and Tuesday, in the absence of new signals, I expect the uptrend to continue. Likely weak growth, as the news background during these days will be light. A close below 1.1695 would favor the U.S. currency and a decline toward the support zone at 1.1637–1.1645.

The wave picture on the hourly chart remains simple and clear. The last completed upward wave broke the peak of the previous wave, while the last downward wave did not break the previous low. Thus, the trend is currently bullish, although not very strong or confident. The latest labor market data and the changed outlook for Fed monetary policy support only the bullish traders.

There were few important reports on Friday. Inflation in Germany rose to 2.2% y/y in August, but the ECB has already informed the markets that it does not intend to conduct further monetary easing in the near future. However, the regulator also does not expect strong inflation growth, so most likely this indicator will continue to hover around 2%, without causing discomfort. In the U.S., the University of Michigan Consumer Sentiment Index declined again, but traders were already resting and waiting for the new week.

This week, several speeches by ECB President Christine Lagarde and the Fed meeting will take place. The Fed meeting will determine the pair's further movement. The question now can be framed as follows: how many times will the Fed cut rates before the end of the year? The baseline scenario – twice; the dovish scenario – three times. Traders lean toward the dovish scenario, so Jerome Powell's comments will be very important. However, I do not think the Fed Chair will give any forecasts. Most likely, he will limit himself to the standard phrase: "the Fed's decisions will depend on economic data."

On the 4-hour chart, the pair consolidated above the horizontal channel, which allows traders to expect further growth toward the 161.8% retracement level at 1.1854. No emerging divergences are visible on any indicator today. A rebound from 1.1854 would favor the U.S. dollar and a decline, while consolidation above 1.1854 would increase the pair's chances of continuing higher toward the next level at 1.2066.

Commitments of Traders (COT) report:

In the last reporting week, professional players opened 2,389 long positions and closed 3,696 short positions. The sentiment of the "Non-commercial" group remains bullish thanks to Donald Trump and continues to strengthen over time. The total number of long positions held by speculators now stands at 258,000, compared with 132,000 short positions. The gap is practically twofold. Also note the number of green cells in the table above, reflecting strong increases in positions on the euro. In most cases, interest in the euro continues to grow, while interest in the dollar declines.

For thirty-one consecutive weeks, large players have been reducing short positions and increasing longs. Trump's policies remain the most significant factor for traders, as they could trigger numerous problems with long-term and structural consequences for America. Despite the signing of several key trade agreements, many major economic indicators continue to decline.

News calendar for the U.S. and the Eurozone:

• Eurozone – Speech by ECB President Christine Lagarde (06:00–10:00 UTC).

September 15 – the economic calendar contains one entry of little importance. The impact of the news background on market sentiment on Monday will be weak.

EUR/USD forecast and trading tips:

Sales can be considered today if the hourly chart closes below 1.1695, targeting the 1.1637–1.1645 zone. Purchases could have been made at the end of last week when the pair closed above 1.1695, targeting the 1.1789–1.1802 zone. These trades can remain open today, with Stop Loss moved to breakeven.

The Fibonacci grids are built from 1.1789–1.1392 on the hourly chart and from 1.1214–1.0179 on the 4-hour chart.

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