**EURUSD Key Considerations for Trading in August**
*Adapted from the original analysis by Justin Bennett at Daily Price Action*
The EURUSD remains a cornerstone of the Forex market, providing both liquidity and volatility, which appeals to traders seeking opportunity. As we progress into August, the technical landscape of EURUSD has presented notable changes, requiring traders to carefully assess upcoming movements and refine their strategies. This article will break down the current scenario, examine the critical price levels, and highlight factors that are likely to influence EURUSD performance in the coming weeks.
**Recap: EURUSD in July**
Before looking ahead, it is instructive to understand how EURUSD performed throughout July.
– The pair displayed a notable degree of choppiness.
– Range-bound movement dominated as bulls and bears fought for control.
– A brief surge near 1.1150 was met by selling pressure, triggering a reversal.
– By late July, the pair retested support levels around 1.0830-1.0850, attracting buying interest.
This indecisiveness reflected traders’ anticipation of central bank decisions and mixed economic data. Both the European Central Bank (ECB) and the Federal Reserve maintained a cautious stance, acknowledging persistent inflation and moderate economic growth.
**Key Technical Levels to Watch**
August presents new possibilities for EURUSD, but trading decisions must be informed by essential support and resistance levels. These zones often mark pivotal turning points.
*Key resistance levels:*
– 1.1100: Round number, psychological resistance, intersecting with a descending trend line.
– 1.1150: July swing high, coincides with supply zone from earlier in the summer.
– 1.1270: Multi-month high; if bulls reclaim, it could favor a longer-term bullish narrative.
*Key support levels:*
– 1.0830-1.0850: Notable demand region, tested multiple times in July.
– 1.0780-1.0800: Minor support, previously served as a springboard in early summer.
– 1.0725: Structural support, failure here could indicate a shift toward bearish control.
**Daily Price Action and Chart Analysis**
Technical analysis highlights major patterns in play:
*Rising Channel & False Breakouts*
– For most of 2023, EURUSD traded within a rising channel originating from the late 2022 lows.
– Several attempts at channel breakouts were met with swift rejection, reinforcing the channel’s importance.
– A recent break below channel support in July hinted at a possible trend shift, but the pair quickly reclaimed the level, resulting in a classic “bear trap.”
– Such false breakouts often result in strong counter-moves, suggesting a potential rally if buyers defend current support.
*Bearish Divergence & Momentum Concerns*
– The Relative Strength Index (RSI) on the daily chart indicated bearish divergence throughout July.
– Price printed higher highs while RSI failed to confirm, a common precursor to corrective moves.
– Traders should closely monitor whether the RSI returns above the 50 mark, which could validate a renewed bullish push.
*Short-term Moving Averages*
– The 20-day and 50-day exponential moving averages (EMAs) have recently converged.
– If the 20-day EMA crosses below the 50-day EMA, it could signal further weakness.
– For August, price action relative to these EMAs will be crucial. A sustained move above may reignite bullish momentum.
**Macro Drivers for August**
Technical analysis offers clarity, but fundamental factors underpin the trend. The following drivers should remain on your radar for August:
*Federal Reserve Monetary Policy*
– The July Fed meeting reaffirmed a “data-dependent” approach.
– The market is pricing a high probability that further rate hikes could be on hold.
– U.S. inflation data and labor market reports in early August will heavily influence sentiment.
*ECB Policy and Eurozone Growth*
–
Read more on GBP/USD trading.