EUR/USD: outlook for August 21-25

In line with expectations, EUR/USD moved horizontally between 1.1845 and 1.1685 during the past week. European stocks were affected by terrorist attack n Barcelona.

The minutes of the ECB July meeting revealed the central bank’s concern over the euro’s strength. It also seems that officials are still uncertain how to signal changes in their policy settings as the economic outlook improves and the need for broad-based bond purchases diminishes.

The ECB President Mario Draghi will address a conference in Germany on Aug. 23, and two days later attends the US Federal Reserve’s Jackson Hole symposium. According to a Reuters report, Draghi won’t deliver a new policy message in Jackson Hole. At the same time, taking into account low inflation in the euro area and other developed economies, any comments on this point will have an impact on the market.

Other events in the region’s economic calendar include German ZEW economic sentiment index on Tuesday, euro zone’s flash manufacturing & services PMIs on Wednesday and German Ifo business climate on Friday.

The pair’s now in a correction within the overall uptrend. The trend channel will stay intact as long as the pair’s above 1.1625. It looks like the euro will visit this level. If it is breached, the pair will be vulnerable for a decline to 1.1540. A close below 200-week MA at 1.1770 won’t be a very encouraging sign. Return above 1.1790 is needed to open the way to the recent highs at 1.1845 and 1.1910, as well as the psychological level of 1.2000.

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Elizabeth Belugina