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On Wednesday, trading on the euro closed up. Towards the end of the US session, the pair experienced increased volatility and the exchange rate sharply dropped. After a 90-pip surge to 1.1910, the pair underwent a 60-pip correction to 1.1850. In Asia, this drop continued to 1.1834.

As I’ve said before, when there’s a sharp rise or drop in a currency at a time when no significant news has been released, it either means that someone important is speaking or that some kind of emergency situation has taken place somewhere.

Fed member Bullard’s speech had a negative influence on the US dollar. He noted that he was worried about the US’s weak inflation data and that he was not in favour of a rate hike in the near future. Fed member Mester believes that three interest rate hikes of 0.25% each is enough for one year so as not to overheat the economy.

According to CME’s FedWatch, the probability of a rate hike in September is 1.4% (this value was 20% a month ago), and the probability in December is 45.5%.

US statistics:

US employment change: 178,000 (forecast: 185,000, previous reading revised from 158,000 to 191,000).

Day’s news (GMT+3):

• 10:55 Germany: Markit services PMI (Jul).
• 11:00 Eurozone: ECB economic bulletin, Markit services PMI (Jul).
• 11:30 UK: Markit services PMI (Jul).
• 12:00 Eurozone: retail sales (Jun).
• 14:00 UK: BoE interest rate decision, BoE quarterly inflation report, BoE MPC vote count, monetary policy summary.
• 14:30 UK: BoE governor Carney’s speech.
• 14:30 USA: Challenger job cuts (Jul).
• 15:30 USA: initial jobless claims (28 Jul).
• 16:45 USA: Markit services PMI (Jul).
• 17:00 USA: ISM non-manufacturing PMI (Jul), factory orders (Jun).

EUR/USD rate on the hourly. Source: TradingView

There may seem to be a reversal happening, but there isn’t. The price again almost corrected to the LB balance line. Due to important events today, I’ve decided not to make a forecast. Trader attention today is going to be focused on the ECB’s economic bulletin, the Bank of England’s meeting and Mark Carney’s subsequent speech. Volatility is expected to be high both on the euro and the pound, and especially on the euro/pound cross.

Fundamental factors and geopolitics are having a marked effect on the market, more so than technical factors. Technical analysis is used to find an ideal entry point into the market in conjunction with fundamental data.

Now I’d like to bring your attention to the US dollar index. The DXY has reached the resistance zone 91.91 – 93.13 (weekly timeframe). Yesterday, an intraday pattern formed, from which the price could exit upwards to 93.52. For buyers of the dollar to have their plan realised, they need to withstand two levels; 92.77 and 92.65. The DXY is currently being quoted at 92.91. Growth above 93.16 will be the first bullish sign of a correction.

Concerning the euro, a support has emerged between 1.1828 (67 degrees) and 1.1834 (TR1). With the trend, the price could return to 1.1888. I don’t expect a new high to be hit, though.