4-hour timeframe
Technical data:
The upper channel of linear regression: direction – down.
The lower channel of linear regression: direction – upward.
The moving average (20; smoothed) – sideways.
CCI: 13.9752
On Tuesday, October 29, the EUR/USD currency pair returned to the Murray level of "6/8" - 1.1108, and at the same time overcame the moving average line. The movements of the pair in the last few days clearly cannot be called a trend. In principle, this is not surprising, since no important macroeconomic information is available to traders now. Thus, we have a small correction against the upward trend, which may well end around the level of 1.1073. Or it may not end. This issue should be resolved today, as a large amount of fundamental information should excite the markets and bring them out of hibernation.
The most interesting thing is that the results of the meeting and the press conference of Jerome Powell can both provide strong support for the euro currency, and no less weak support for the US currency. Traders will expect one of two options today:
1) Lower rates and the announcement of future easing monetary policy.
2) Lower rates and a statement on a pause in easing monetary policy.
With the first option, the euro currency will easily resume strengthening, as this factor will be bearish. The gap between the rates of the ECB and the Fed will not only narrow but will also receive serious reasons for the reduction in the future. Namely, the factor of "gap between rates", from our point of view, is one of the most important in exchange rate formation. In the second option, the American currency will receive support, since this will mean that the gap between the monetary policies of the European Union and the United States will cease to narrow for some time, probably until mid-2020. But it may start to increase again, as the European Central Bank, led by Christine Lagarde, can continue to lower key rates. At least in his recent speeches, Mario Draghi actively hinted at the need for similar measures in the future. Since Lagarde cannot come and change in a month everything that Mario Draghi worked for 8 years, in any case, she will become his follower. Accordingly, for some time the ECB's monetary policy will still move by inertia at the rate of Mario Draghi. This means that the probability that macroeconomic statistics in the eurozone will continue to deteriorate is high. Well, the increase in the gap between rates can easily return bears to the markets and provoke a resumption of the downward trend.
In addition to events related to the actions of the Fed, today will also be published data from ADP on the change in the number of workers in the private sector, as well as data on US GDP for the third quarter (preliminary). According to experts, the number of new employees may reach 120,000, and GDP will show an increase of 1.7% y/y (at the previous value of 2.0%). It is impossible to say that it is a lot or a little. The US dollar has lost ground in recent weeks, so the decline in GDP has already been taken into account by traders. But if the real values of the indicators will be even worse than the weak forecasts, then the US currency may again begin to experience problems.
The technical picture of the EUR/USD currency pair was unexpectedly confused yesterday. Earlier, we expected a continuation of the downward movement, but yesterday the pair turned up out of the blue and overcame the moving average. We even believe that this is a kind of reaction of traders to the yet unannounced results of the Fed meeting. Market participants expect, perhaps, "dovish" rhetoric and rate cuts, and begin to get rid of the US currency in advance. Thus, only an evening performance by Jerome Powell will completely dot all the "and". So far, formally, there are more chances for the continuation of the upward movement, but the proximity of the moving average line allows us to expect a new change in the trend for the euro/dollar at any time.
Nearest support levels:
S1 – 1.1047
S2 – 1.0986
S3 – 1.0925
Nearest resistance levels:
R1 – 1.1108
R2 – 1.1169
R3 – 1.1230
Trading recommendations:
The euro/dollar pair is adjusted again at the moment. Thus, today it is recommended to sell the pair with the target of Murray's level of "5/8" - 1.1047 if the bears overcome the moving again. It is recommended to buy the euro currency after overcoming the Murray level of "6/8" with a target of 1.1169. However, in any case, the trend for the pair may change during the US trading session, as well as late in the evening, at the events associated with the Fed.
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) – blue line on the price chart.
Support and resistance – red horizontal lines.
Heiken Ashi – an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
