The hoped-for August break from EUR/USD summer ranges didn’t happen, as investors’ opinions on the sustainability of the global economic recovery remain mixed. However, September is historically the most volatile month in forex trading, and a range breakout therefore remains possible within the next few weeks.

Below is an updated version of the daily EUR/USD chart, as referenced in a previous article. The ranges are marked in yellow horizontal lines, at 1.2329 (representing the lowest reaches of the post-Lehman panic), 1.3090, 1.3750, 1.4340 (the upper boundary of the current range), and 1.4870. The vertical pink line on the left indicates where the price action rose into the range marked C; the one on the right marks the date when the previous article was written:

Note that since the previous article (14 July 2009), the price action has tended toward the upper boundary of the C range, with no fewer than eight spikes above the 1.4340 line. This confirms a bullish trend since that date, as shown below on the four-hour chart:

Further confirmation is provided by a bullish trend line, forming the sloping bottom of a bullish consolidation pattern. The upper boundary is the resistance at 1.4340, as shown on the daily chart, below:

Many technical signals have passed without follow-through from the market since the Lehman debacle, and this one could also fade into the night. Should the market answer, the chance of a false breakout remains until the previous reaction high, at 1.4447 set 5 August and roughly corresponding to an historic support/resistance level at 1.4436, has been well and truly breached. Beyond that, look for resistance at 1.4525, 1.4575, and 1.4656.

Fundamental event risks on the weekly calendar that could affect this potential trade include:

August German Ifo surveys, scheduled for release Wednesday 26 August, 8:00 AM GMT (6:00 PM Canberra time). Markets expect improvement to 92.0 expectations, 89.0 business climate, and 86.0 current assessment. As the Ifo is closely correlated with German GDP expectations, this has the potential to directly drive EUR/USD for better or worse.

U.S. July durable goods orders, due Wednesday 26 August, 12:30 PM GMT (10:30 PM Canberra time) and U.S. July new home sales an hour and a half later. For durable goods, markets expect an improvement of 3.0% m/m, 0.9% ex-transport; for new home sales, a rise of 1.6% m/m following the 11.0% surge in June.

The first revision to U.S. 2Q2009 GDP, due Thursday, 27 August, 12:30 PM GMT (10:30 PM Canberra time). Markets widely expect this to be revised down from −1.0% annualised to −1.4%. Note that U.S. initial jobless claims for the week ending 22 August will be released concurrently, for a potential double whammy on EUR/USD. The expectation is for an improvement to 565K, with both upside and downside potential.

Finally, the U.S. August UofM consumer confidence survey will be released Friday, 28 August, 2:00 PM GMT (midnight Friday/Saturday Canberra). Markets are looking for an improvement to 64.5, with upside potential based upon the better-than-expected Conference Board reading Tuesday, which however tends to be more volatile than the UofM survey.

All of the U.S. data will tend to be counterintuitive, e.g., upside surprises may lead to USD depreciation as it boosts investor confidence, while downside surprises may cause safe-haven flows into USD and therefore appreciation.