Current trend

The European currency is showing ambiguous dynamics during the Asian session on August 22, consolidating near 1.1145 around ​​record highs of July 2023, renewed yesterday.

Today, the markets focused on the August business activity. The manufacturing PMI in France fell from 44.0 points to 42.1 points, Germany – from 43.2 points to 42.1 points, while in the services sector the situation is gradually stabilizing, and the French indicator reached 55.0 points, which is higher than 50.1 points in the previous reporting period but the German one fell from 52.5 points to 51.4 points. Pan-European statistics were also ambiguous: manufacturing PMI adjusted from 45.8 points to 45.6 points, and the services PMI – from 51.9 points to 53.3 points, which is unlikely to put serious pressure on the euro’s position.

The American currency is holding at 101.0 points in the USDX. Investors are preparing for a change in the course of monetary policy in the United States, at least the minutes of the last meeting of the department indicated that officials were ready to begin cutting the interest rate as early as July. Now traders are waiting for the opening of the annual Economic Symposium in Jackson Hole, where, among other things, the head of the US Fed Jerome Powell will speak, who will likely comment on forecasts for a possible reduction in the cost of borrowing, starting with the September meeting. In particular, investors are still trying to analyze whether the regulator will decide to reduce the indicator in September by 50 basis points at once or will act gradually. In these conditions, the continuation of local growth of the EUR/USD pair looks like the most likely scenario but corrections in the event of a recovery of the dollar’s positions cannot be ruled out either.

Support and resistance

On the daily chart, the instrument’s the quotes are completing the movement in the range between the first-order levels (I) and are getting closer to the right first-order resistance level (I) of 1.1170.

The most likely scenario at the moment is the continuation of the upward dynamics, and if the nearest third-order level (III) is overcome, the quotes will test the crossover of the left third-order resistance (III) and the right third-order resistance (III) at 1.1152, after which the movement will continue to the crossover of the right first-order resistance (I) and the left second-order resistance (II) at 1.1247.

An alternative scenario will be a reversal. In this case, the correction dynamics may accelerate in a stable downward trend, where the local crossovers of the right support of the first order (I) and the left support of the third order (III) at 1.1074 will act as the nearest target. If the quotes hold in the downward trend, the long-term target will be the crossover between the left support of the second order (II) and the right support of the third order (III), at 1.0962.

Support levels: 1.1074, 1.0962.

Resistance levels: 1.1152, 1.1247.

Trading tips

Long positions may be opened after the consolidation above 1.1152, with the target at 1.1247. Stop loss – 1.1110.

Short positions may be opened after the consolidation below 1.1074, with the target at 1.0962. Stop loss – 1.1110.