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EURUSD: price action enters reversal territory between 112th and 135th degrees

Trading in the EURUSD pair closed to the downside on Monday, September 21. The single currency slipped 0.56% against the US dollar to 1.1771, but managed to end higher against the pound. The EURGBP pair climbed 0.21% to 0.9184.

The US dollar rallied on the back of a decline in cable. The sharp drop in the euro and the pound sterling stemmed from reports about further increases in the incidence of COVID-19 and the possible imposition of lockdowns. Market-wide negativity was heightened by news that large US and European banks were involved in money laundering and fraud.

Germany’s health minister said that the upsurge in Covid-19 inflection rates in France, Austria and the Netherlands is alarming. Furthermore, the UK health minister said the likelihood of a second lockdown in the country has increased.

Trading floors in Asia and Europe tumbled more than 3% as the threat of new pandemic-related lockdowns raised fears about the global recovery. US equity indices followed European markets lower.

The International Consortium of Investigative Journalists (ICIJ) reported that JP Morgan, HSBC, Standard Chartered Bank, Deutsche Bank, Bank of New York Mellon and others allowed suspicious transactions to be performed for huge profits, breaching currency control rules. UK and US bank shares retreated 5% on average. As it turns out, these banks have been moving illicit funds worth more than $2 trln over the past 20 years.

Todays macro agenda (GMT+3)

13:00 UK: Confederation of British industry industrial trends orders (September)

17:00 US: Richmond Fed manufacturing index (September), existing house sales (August); Eurozone: CCI (September)

17:30 Fed Chair Powell testimony before US Congress


Current outlook

Our goal of 45 degrees of the Gann angle was quickly reached. The euro shed 140 points and sank to 1.1732. The pair’s decline halted at the 112th degree.

Later attempts at a rebound proved unsuccessful. The euro bears resumed selling the single currency before the European opening. As a result, we can see again that all major currencies are trading in the red. The top underperformers included the pound (-0.42%) and the Australian dollar (-0.46%).

Today, British PM Boris Johnson is expected to deliver a speech outlining new lockdown measures in the country to combat the second wave of coronavirus. These restrictions are bound to exert a negative impact on all markets.

In line with our forecast, we see the price action retracing to previous lows and the rebounding from 1.1713. And while there is no certainty, we believe that after yesterday's pullback, the range of 112-135 degree could hold back sellers. The first rebound will show whether or not to expect a deep correction.

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