The adopted rescue plan will give a significant boost to the US economy.
Hello, dear traders!
Yesterday, the House of Representatives signed a relief package to support the American economy. Clearly, this can be regarded as one of the most prominent and important events. The adopted rescue plan is intended to create 7 million new jobs and provide unemployment benefits of $300 for eligible Americans. On top of that, 85% of American taxpayers will receive direct payments of $1,400. The size of the stimulus package is almost two trillion dollars. It took both Democrats and Republicans, who opposed the plan, a good deal of time to approve the bill. In the end, the American Rescue Plan was approved by a vote of 220-211.
Meanwhile, the World Health Organization (WHO) recorded a sharp global increase in new COVID-19 cases. The coronavirus situation is still alarming and people cannot get back to normal due to tough restrictions. Nobody knows how long this is going to last. People in many countries are not pleased with what is happening. In the Netherlands and the Czech Republic, citizens gather to protest against restrictions. Oftentimes, protests turn into clashes with the police. However, due to disruptions to vaccine supplies in the EU, the initial inoculation plan, as well as the pace of vaccination, has to be changed. All this leads to extended and tougher lockdowns.
As for yesterday's trading on EUR/USD, investors were focused on the US CPI report. The indicator commonly affects inflation, which is a weak spot of the US economy. In fact, inflation still can't reach the Fed's target of 2%. This fact confirms the intention of the Federal Reserve to keep interest rates at the ultra-low level for a long period of time. All this also has a damaging effect on the greenback. Anyway, the US consumer price index turned out to be worse than economists had expected. Supposedly, this led to the weakening of the US dollar.
Daily chart
The pair is recovering after a fall to 1.1835. The EUR/USD has already reached a broken support level of 1.1952 while trading near 1.1965. If the price closes above 1.1952, a breakout at this level will be regarded as a false one. In this case, a false breakout of the support level may well contribute to the beginning of the upward trend. Notably, the price range of 1.1830-1.1800 is very strong and can have considerable effect on EUR/USD. Apart from that, it is a clear buy signal. If today's upward trend extends, bull will have to not only close above 1.1952 but also to break through a strong level of 1.1975. It has led to a trend reversal several times. The level is also the 50% retracement of the Fibonacci grid stretched in the range of 1.1601-1.2348 as well as the red Tenkan-sen line. In this light, the price is likely to encounter additional resistance at 1.1975. Bullish sentiment is expected to grow if the price breaks through 1.1975. According to the chart, the black 89 EMA and the blue Kijun-sen are above the psychological point of 1.2000. I assume that the upward trend will begin only if the price breaks through the Kijun-sen and consolidates above it. The targets will be determined only in case of a breakout.
H4 chart
Taking into account the Fibonacci grid that stretches in the 1.2242-1.1835 range, the price is currently correcting. The upward trend will resume only if the pair breaks through the orange 200 EMA located at 1.2055. Currently, it is hard to determine the entry point. Therefore, cautious traders should wait and see whether it is the correction or the upward trend. Those who decide to trade right amid uncertainty should bear in mind both options. You can open long positions after a fall to the 1.1955-1.1915 range and the formation of bullish candlesticks on the H4 or H1 chart. Alternatively, you can open short positions in the 1.1975-1.2015 price range in case there are bearish signals. I believe that the price is correcting at the moment. However, a correction often leads to a trend reversal which is still a downward one.
Have a nice trading day!
