FX.co ★ Forecast for EUR/USD and GBP/USD on July 25. The growth rate of the EU economy remains weak. The probability of reducing the rate of 30/70

EUR/USD – 4H.

As seen on the 4-hour chart, the EUR/USD pair continues the process of falling in the direction of the correction level of 100.0% (1.1107). Bullish divergence is still brewing, but on the eve of the ECB meeting, traders have no reason to buy the euro. According to surveys of various analytical and rating agencies, the probability of reducing the deposit rate today does not exceed 30%. These 30% are given to the so-called surprise. Traders expect that the European Central Bank will hint at a rate cut and only at the next meeting will take such a serious step. However, in any case, if the ECB reduces the rate on deposits, it will mean a serious blow to European banks. After all, a negative deposit rate means that banks pay the ECB. Accordingly, the lower the rate, the more you have to pay. Mario Draghi is certainly not an enemy to himself, the ECB will continue to closely monitor trends in the banking sector to prevent a new liquidity crisis. A new long-term lending programme for TLTRO banks will soon be launched. And what about the euro? The euro may start to rise if Mario Draghi refrains from hinting at lower rates. The rebound of the euro/dollar pair may also work in favor of the EU currency and some growth in the direction of the correction level of 76.4% (1.1180).

The Fibo grid is built on the extremes of May 23, 2019, and June 25, 2019.

Forecast for EUR/USD and trading recommendations:

The EUR/USD pair performed a consolidation below the correction level of 76.4% (1.1180). I recommend continuing to sell the pair with the target of 1.1107, with the stop-loss order above the level of 1.1180. I recommend buying the pair with the target of 1.1180 and stop-loss order under the level of 1.1107, if it will be rebounded from a correction level of 100.0%, especially in conjunction with a bullish divergence.

GBP/USD – 4H.

The GBP/USD pair performed the rebound from the correction level of 100.0% (1.2437) and the beginning of the weak process of growth towards the level of 76.4% (1.2661). This also coincided with the first speech of Boris Johnson as Prime Minister of Great Britain. Quite unexpectedly, Johnson said that there is only a ghostly hope that the country will leave the European Union without an agreement. That is, the new Prime Minister will still try to negotiate with the European Union. Boris Johnson expressed the hope that the new government will be able to convince the EU on the issue of "backstop" on the border between Ireland and Northern Ireland, which Johnson considers anti-democratic. Johnson also hopes for fruitful and "warm" cooperation with the EU after October 31. He addressed the following message to British citizens: "Yes, in the case of Brexit without agreements, it will be difficult, but not as much as the media assure. Brexit without a deal does not suit us, but everything will depend on the EU government." Traders regarded this speech as a new hope for an orderly Brexit. Boris Johnson himself quickly changed the rhetoric. Earlier, he almost categorically said that the country would leave the EU on October 31, no matter what, in a tough scenario. The consolidation of the pound/dollar pair under the Fibo level of 100.0% will allow traders to expect a new fall in the direction of the correction level of 127.2% (1.2180).

The Fibo grid is built on the extremes of January 3, 2019, and March 13, 2019.

GBP/USD – 1H.

As seen on the hourly chart, the pound/dollar pair performed an increase to the correction level of 100.0% (1.2506), a rebound from it and a turn in favor of the US dollar. As a result, on July 25, a fall began in the direction of the correction level of 127.2% (1.2430). Today, the divergence is not observed in any indicator. Fixing the pair above the Fibo level of 100.0% will work in favor of the resumption of growth in the direction of the correction level of 76.4% (1.2571).

The Fibo grid is based on the extremes of June 18, 2019, and June 25, 2019.

Forecast for GBP/USD and trading recommendations:

The GBP/USD pair rebounded from the correction level of 100.0%. Thus, I recommend selling the pair with the target of 1.2430, with the stop-loss order above the level of 1.2506. I recommend buying the pair with the target of 1.2506 and with the stop-loss order below the level of 127.2% (hourly chart), if the rebound from the level of 127.2% is executed.