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EUR/USD: Sell At 1.1575

Published 08/24/2015, 08:38 AM
Updated 07/09/2023, 06:31 AM


GROWTHACES.COM Forex Trading Strategies
Taken Positions
EUR/CHF: long at 1.0780, target 1.1170, stop-loss 1.0640, risk factor *
Pending Orders
EUR/USD: sell at 1.1575, target 1.1330, stop-loss 1.1685, risk factor ***

EUR/USD: Market In Panic Mode, Far Away From Fundamentals
(sell at 1.1575)

  • Stock markets are deeply in the red today. The renewed sell-off came amid news that the Chinese government will allow pension funds to buy shares, while the awaited cut in the reserve requirement ratio – one of the key policy tools of the central bank of China – did not materialize. This disappointed markets and additionally fueled today’s sell-off.
  • On the rates side, the 10-year US Treasury yield fell through the 2% mark for the first time since May and the EUR/USD rose to a session high of 1.1541. Our short position hit the stop-loss level.
  • Investors pushed back expectations of a rate hike by the Federal Reserve in September. However, in our opinion, there are really no strong fundamentals to such a strong market reaction and significant shift in market expectations – US macroeconomic data are strong and Fed policymakers remain hawkish. Federal Reserve Bank of St. Louis President James Bullard said on Friday: “The Fed still needs to hike rates and market has it wrong on global growth.” His comments were ignored by the market, which is in panic mode now.
  • Moreover, recent USD weakness only increases the likelihood of a rate hike, as weaker USD supports US exports and increases inflation pressure. Medium- and long-term macroeconomic forecasts that are crucial for monetary policy remain unchanged.
  • We are still of the opinion that the market picture may be definitely different in a couple of days. In our opinion, daily EUR/USD charts are heavily overbought and corrective action looks due here. We are looking to get short at 1.1575 and expect the EUR/USD to fall in the short-term – we need only one hawkish comment from Fed policymaker to change the current market picture. The USD will probably also get support from the US GDP data revision on Thursday. However, trading is very risky now as the volatility is very high now.
  • A rise in the EUR value on fears about a slowdown in the Chinese and global economies is not a typical market reaction. The EUR usually appreciates when risk appetite improves, but not in times of arising uncertainties. Our medium- and long-term EUR/USD forecasts remain bullish. We still plan to change our EUR/USD strategy to “buy,” but rather in a couple of weeks. However, this change will be a result of expected rise in demand for riskier assets and acceleration of inflation in the Eurozone and not a result of global economic slowdown.
  • We have been claiming in months that the USD is likely to depreciate at the end of the year, as too strong USD is harmful to US economy (and Chinese economy too). We have been far away from popular forecasts that pointed to EUR/USD parity. However, the strong drop in the USD value just before a Fed hike, that is still very likely in September after Bullard’s comments, is quite surprising and probably will be reversed soon.


EUR/USD Daily Chart

Significant technical analysis' levels:

Resistance: 1.1542 (session high Aug 24), 1.1652 (high Jan 22), 1.1680 (high Jan 21)
Support: 1.1370 (hourly low Aug 29), 1.1332 (200-dma), 1.1230 (low Aug 21)

Source: Growth Aces Forex Trading Strategies

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