4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - upward.
CCI: 75.9549
The EUR/USD currency pair was trading fairly calmly on the 4-hour timeframe on Friday. This is perfectly noticeable in the indicator of the volatility of the pair for the day. It was only 54 points, which is a very low value, bordering on the definition of "low". However, the pair's quotes remained above the moving average line, so the upward trend continues. Although both linear regression channels are now directed downwards. We have already said that we expect a new upward trend to form since the euro/dollar pair has already adjusted sufficiently in 2021, so now we can buckle up and take the course to the 23rd level and higher. Of course, in the modern world, everything changes very quickly in the financial markets, and the number of factors that hypothetically affect a particular economy is quite large. But it will not be possible to take into account all the factors and combine them in any case, so we continue to focus on the most global ones. As we said earlier, there are now two such global factors for the euro/dollar pair: the factor of inflating the money supply in the US and the factor of the difference in the speed of recovery of the US and EU economies. We believe that the first factor is more important, so we bet on the continued growth of the pair and the depreciation of the US dollar in 2021. However, it should be remembered that any fundamental hypothesis necessarily requires technical confirmation. Simply put, if the "foundation" and "technique" coincide.
There are now two pressing issues for the US currency. Everything is quiet and peaceful in the European Union. First, the States have conceived by forcing the introduction of a single corporate tax around the world, which is beneficial to the States themselves (especially now that the national debt has grown to obscene proportions, and Joe Biden is going to raise taxes for the rich and corporations and initiates another package of incentives for US infrastructure for $ 2.6 trillion), as well as to all rich and developed countries where the corporate tax rate is high. Poor, developing, and small countries, of course, do not need such a tax at all, because low taxes are almost the only option for them to attract large corporations and fill their budget with tax revenues from them. By the way, this scheme is beneficial to all, except for the rich countries, which lose huge tax revenues to their budget. However, we will not talk about justice now. There isn't much of it in the world anyway. If the United States raises corporate taxes, and a single corporate tax rate is introduced around the world, there will be a massive migration of companies from country to country. It is far from a fact that if a single rate is introduced, all large companies will immediately rush to their homeland. After all, the problem for them is not only in taxes but also in the cost of labor or the cost of living in a particular country. Simply put, in Malaysia, everything is cheaper, compared to America. Therefore, even if the income tax rates are the same, most likely, the companies will remain in Malaysia, as there is much cheaper labor, cheaper logistics, easier to negotiate with the authorities. However, there will also be companies that will be unprofitable to stay in offshore companies. And there will be some companies that, on the contrary, will leave the States because of the new, higher tax. Thus, if these initiatives are implemented, then in the next couple of years there will be a massive movement of capital and production around the world. What threatens the economy of each country is still unclear. In any case, this is not a near-term prospect for the dollar.
Secondly, Joe Biden decided to implement another package immediately after the 1.9-trillion stimulus package, which will mostly be aimed at infrastructure development. However, this project involves just raising several taxes for the rich and large corporations at once. From our point of view, this is a double-edged sword, because, in the end, the final consumers will still pay these taxes. Prices for goods will simply rise, and companies will have an "ironclad" explanation – taxes have increased. However, this bill will still need to be pushed through the US House of Representatives and the US Senate. What if there were no problems with Joe Biden's first package of incentives because the US legislation is full of loopholes that allow almost any bill to be passed by a simple majority, and not 2/3 of the votes. And since the Democrats have a majority in both the lower house and the upper house, there shouldn't be any problems this time either. But it turned out that all Republicans are against raising taxes and another giant stimulus package. And even some Democrats are against such budget measures. For example, Senator Joe Manchin has already said that he and several other senators may oppose Joe Biden's package and oppose tax increases. Manchin's opinion is quite categorical: "The bill cannot exist in the form in which it is presented." This means that either the project must be finalized, or it will be rejected completely. Of course, at the moment, it is difficult to imagine what would happen if they went against Joe Biden. Most likely, all opponents will be persuaded, and the bill will be passed by a simple majority in both chambers. However, there may be problems with the second "rescue plan". For the US dollar, the lack of new cash injections into the economy will be great news, as the money supply in the US will not inflate even more, which will allow the dollar to avoid a new fall against its main competitors.
The volatility of the euro/dollar currency pair as of April 12 is 68 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1831 and 1.1967. The reversal of the Heiken Ashi indicator downwards signals a possible round of a downward correction.
Nearest support levels:
S1 – 1.1841
S2 – 1.1780
S3 – 1.1719
Nearest resistance levels:
R1 – 1.1902
R2 – 1.1963
R3 – 1.2024
Trading recommendations:
The EUR/USD pair continues its upward movement. Thus, today it is recommended to stay in long positions with a target of 1.1963 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair is fixed back below the moving average line with targets of 1.1780 and 1.1719.
