4-hour timeframe
Technical data:
The upper channel of linear regression: direction – down.
The lower channel of linear regression: direction – sideways.
The moving average (20; smoothed) – up.
CCI: 55.7767
The EUR/USD currency pair adjusted for the first two trading days of the week against the background of an empty calendar of macroeconomic events but managed to maintain an upward trend. What to expect from today? Today, the consumer price index in the European Union for September will be published in the first half and judging by experts' forecasts, no improvement in EU inflation is expected. Forecasts suggest that inflation will be 0.9% y/y. Even in the case of a stronger value (for example, 1.0%), it is only 1% inflation, which does not allow the ECB to even relax a little and stop thinking about another easing of monetary policy. What can we say if inflation slows even more, which also cannot be ruled out? In general, if the indicator is less than 0.9% y/y, then, most likely, the demand for the euro currency will decrease sharply, and the bears will be able to overcome the moving average line, which will return the quotes to a downward trend.
In the afternoon, a report on US retail sales will be published. This indicator feels relatively good, and forecasts are neutral. It remains only to wait for the publication and find out whether the sales of September turn out to be better or worse than forecasts.
In general, according to today's package of macroeconomic statistics, we can say that European statistics have every chance to continue to deteriorate, while American statistics, against the backdrop of de-escalation of the trade conflict with China, can stop the slowdown. Although, of course, it is unlikely that the effect of the positive Washington-Beijing talks will be so rapid. However, we begin to believe that the European currency has no special growth prospects. Moreover, after a few weeks of respite, the US dollar may begin to regain the initiative in the forex market, as the US economy may begin to show signs of recovery in the coming months. The question remains only in the Fed, which can continue to act on the instigation of Donald Trump while talking about its independence from political influence. The third reduction in the key rate in a row could hit the US currency hard, especially when there was no serious deterioration in macroeconomic indicators. Even the notorious Nonfarm Payrolls, which came out slightly worse than forecasts, showed a solid increase in new jobs created. And we don't think this report is weak. Thus, everything once again boils down to the actions of the ECB and the Fed at the end of the month, as both central banks have set a course for easing monetary policy, which is why this topic is most concerned about market participants.
From a technical point of view, the euro/dollar pair rebounded from the moving average line, so the upward movement can resume. The Heiken Ashi indicator also turned upward, signaling the same thing. Only a weak inflation report in the eurozone can spoil euro growth expectations.
Nearest support levels:
S1 – 1.1017
S2 – 1.0986
S3 – 1.0956
Nearest resistance levels:
R1 – 1.1047
R2 – 1.1078
R3 – 1.1108
Trading recommendations:
The euro/dollar pair continues to be located above the moving average line. Thus, it is recommended to resume buying the euro currency in small lots with targets of 1.1047 and 1.1078. It is recommended to buy the US dollar if the bears overcome the moving average with the first targets of 1.0986 and 1.0956.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustrations:
The upper channel of linear regression – the blue line of the unidirectional movement.
The lower channel of linear regression – the purple line of the unidirectional movement.
CCI – the blue line in the indicator window.
The moving average (20; smoothed) – the blue line on the price chart.
Support and resistance – red horizontal lines.
Heiken Ashi – an indicator that colors bars in blue or purple.
