corrections

In the wake of 10 consecutive interest rate hikes, it is high time for the markets to embrace a more positive outlook. The Powell-led committee's aggressive pursuit of raising benchmark rates, although necessary, has cast a shadow of pessimism over financial markets, potentially overshadowing the remarkable achievements of industry pioneers. Throughout history, monetary policy has proven to be a valuable tool for achieving financial stabilization in economies. The United States has faced its fair share of hardships in recent times, including a prevailing sense of distrust toward local banks and the adverse ripple effects of the debt ceiling conundrum. These challenges have been further exacerbated by soaring nationwide inflation, which has also left its mark on the cryptocurrency market.   It has been 15 months since the Federal Reserve decided to pause the rate hikes, indicating a momentary respite for the nation's monetary defenses. During this time, cryptocurrencies have displayed a bullish trend when examined from a long-term perspective. While current market conditions may appear to be in the red, they could potentially serve as necessary corrections following the rapid price surges witnessed in the crypto asset space. The Federal Reserve's monetary policy is operating as intended, with continuous and comprehensive assessments of economic conditions. Crucially, these assessments should consider the implications not only for industry leaders but also for everyday households. Adopting a bottom-up approach may yield insightful findings regarding the broader impact of monetary policy decisions.   FXMAG.COM: Could you please comment on the FOMC decision? It’s about time for markets to see the brighter side of day after 10 straight interest rate hikes. The Powell-led committee has been on a frenzy of aggressive benchmark rate increases – while necessary – has infected financial markets with pessimism, and that can overshadow the successes and feats of industry pioneers. Monetary policy has historically served as a very useful tool for achieving economy financial stabilization, and the United States economy has been susceptible to quite the hardship in recent times. The distrustful sentiment towards local banks and the adverse ripple effect of the debt ceiling conundrum had been exacerbated with scorching nation-wide inflation. That has also had its impact on the crypto market. It has been 15 months since the Fed decided to pause the rate hikes, which perhaps is an indication that the nation’s monetary defenses are taking a breather. Since the start of the year, cryptocurrencies have been very bullish when putting on the long-term lenses. While contemporary market conditions are more in the red, they potentially serve as corrections to the recent sharp price bumps in crypto assets. The Federal Reserve’s monetary policy is doing as it should, given continuous extensive assessment of economic conditions. What’s pivotal here is the conditions to be assessed, which in my perspective should take into consideration the implications on industry leaders but also those on everyday households; a bottom-up approach may present quite the insightful findings.  

Analysis of GBP/USD 5M   On Friday, the pound sterling corrected higher after the release of US data. There were three reports, two of which were simply ignored by the market. The decline in the unemployment rate did not save the US dollar from falling, as the market only considered the NonFarm Payrolls, which came in lower than forecast, and the value of the previous month got revised lower.   Therefore, there were grounds for the dollar to fall on Friday. In the UK, there were no important reports or events. The US dollar fell by approximately 105 pips from the daily lows, but if we look at the opening and closing prices of the day, its losses were only 40 pips, and at that moment, they were almost negated. We believe that the pound has no grounds to resume the uptrend.   The trading signals for the pound were almost identical to those for the euro. Traders could use the bounce from the level of 1.2693 to open long positions. Subsequently, the pair broke through the area of 1.2746-1.2762, and it remained above it until the end of the trading session. As a result, the long position could be closed anywhere above the mentioned area, and the profit amounted to at least 70 pips.   COT report: According to the latest report, the non-commercial group of traders closed 13,300 long positions and 3,800 short ones. Thus, the net position of non-commercial traders fell by almost 10,000 positions in a week. But in general, it is still rising. The net position has been steadily growing over the past 10 months as well as the pound sterling. Now, the net position has advanced markedly. This is why the pair will hardly maintain its bullish momentum. I believe that a long and protracted downward movement should begin. COT reports signal a slight growth of the British currency but it will not be able to rise in the long term.   There are no drivers for opening new long positions and not many technical signals for short positions either. The British currency has already grown by a total of 2,800 pips, from its absolute lows reached last year, which is a significant increase. Without a downward correction, the continuation of the uptrend will be illogical. However, there has been no logic in the pair's movements for quite some time. The market perceives the fundamental background one-sidedly, ignoring any data in favor of the dollar. The Non-commercial group of traders has opened 92,100 long positions and 42,600 short ones. I remain skeptical about the long-term growth of the pound sterling but speculators continue to buy and the pair continues to rise.   Analysis of GBP/USD 1H     On the 1H chart, the pound/dollar pair has started to correct, but has not yet broken the downtrend. Consolidation below the critical line may signal a resumption of the downward movement. We believe that there are no grounds for the sterling's growth, so we expect the decline to resume. Of course, that doesn't mean that the pair will fall every day. Periods of consolidation, flat movements, and corrections are possible. On August 7, traders should pay attention to the following key levels: 1.2520, 1.2598-1.2605, 1.2693, 1.2762, 1.2863, 1.2981-1.2987, 1.3050. The Senkou Span B (1.2868) and Kijun-sen (1.2734) lines can also be sources of signals, e.g. rebounds and breakout of these levels and lines. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 20 pips. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. On Monday, there are no important events or reports lined up in the UK and the US, except for perhaps Michelle Bowman's speech. However, it's a bit of a stretch to consider this event important. Therefore, we expect calm movements akin to a flat.   Description of the chart: Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals; The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals; Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals; Yellow lines are trend lines, trend channels, and any other technical patterns; Indicator 1 on the COT charts is the net position size for each category of traders; Indicator 2 on the COT charts is the net position size for the Non-commercial group.  

The EUR/USD currency pair moved upwards and downwards over the past day. Such a movement does not surprise us, as we have repeatedly mentioned that the current move to the south is fairly weak, and corrections and pullbacks occur quite frequently. So it's not surprising that the euro initially dropped and then increased.     Overall, it continues to decline, just not very rapidly or hastily. Yesterday showed us what many had realized long ago. The European economy is just shy of sliding into a recession. For several quarters, GDP indicators have been teetering on the brink of negative values. But what can one expect when the European Central Bank regularly raises its rate? It's worth noting that the GDP is going through tough times with a not-so-high key rate, especially when compared to rates in the UK and the US, where they are much higher.   While the British economy is also struggling, the American economy is growing briskly, giving the dollar a strong advantage. We will discuss business activity indices. For now, it's worth noting that the downward trend for the pair continues, but the CCI indicator went into the oversold zone yesterday. This is a strong buying signal, so we can expect a stronger upward correction soon. Especially since, on the 24-hour timeframe, we are still looking for a confident breakthrough of the Ichimoku cloud. Thus, the pair continues its correction within the global upward trend, but the main movement can resume anytime. What are the fundamental reasons for this? There aren't any. However, it's important to remember that the forex market doesn't always move strictly with fundamentals and macroeconomics.     The European economy is sliding into the abyss. The service sector in the European Union and Germany has fallen below the "waterline." If the manufacturing sector has been in the negative business activity zone for over a year, the service sector entered it in August. Now, both sectors in Germany and the EU are below the key level of 50.0, which does not bode well for the European economy. For instance, business activity indices in the US could be in better shape but still higher than in the EU or Germany.   Hence, we can only state the obvious: US statistics continue to outperform European ones. It's worth noting that the American currency has been falling for almost a year now. This happens when the Federal Reserve's rate rises faster and stronger, and the US economy appears much more stable and confident than the European one. Recognizing this fact leads us to believe that the European currency is extremely overbought and unjustifiably expensive. Based on this, we anticipate a further decline in the European Union's currency.   This week, we are awaiting the speeches by Jerome Powell and Christine Lagarde. Although we think both officials will only provide a little significant information, the market might still grasp certain hints. Both leaders hint at a pause in September; if one doesn't, it might support their country's currency. Given the sharp decline in business activity in the European Union, we believe the likelihood of "dovish" rhetoric from Christine Lagarde is much higher. But the Federal Reserve has also adopted a "two meetings – one hike" policy, so Powell is unlikely to discuss the need for immediate tightening without seeing the August inflation report.       The average volatility of the EUR/USD currency pair over the last five trading days as of August 24 is 65 points and is characterized as "average." Therefore, we anticipate the pair to move between levels 1.0809 and 1.0939 on Thursday. A downturn in the Heiken Ashi indicator will signal a resumption of the downward movement.   Nearest support levels: S1 – 1.0803 S2 – 1.0742 S3 – 1.0681   Nearest resistance levels: R1 – 1.0864 R2 – 1.0925 R3 – 1.0986     Trading recommendations: The EUR/USD pair currently maintains a downward trend. New short positions should be considered with targets at 1.0803 and 1.0742 in case of a downward reversal in the Heiken Ashi indicator or a price rebound from the moving average. Long positions can be considered if the price consolidates above the moving average, with targets at 1.0939 and 1.0986.   Explanations for illustrations: Linear regression channels – help determine the current trend. The current trend is strong if both are directed in the same direction. Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should proceed. Murray levels – target levels for movements and corrections. Volatility levels (red lines) – the probable price channel in which the pair will operate in the next 24 hours, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.