4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - upward.
CCI: 100.9457
The EUR/USD currency pair tried to resume its upward movement on the 4-hour timeframe on Monday. The pound has also started a new round of upward movement, however, in recent articles, we have already said that the factors that affect the movements of the euro and the pound are now slightly different. Nevertheless, on Monday, the euro rose and the pound rose. Therefore, we can assume that the reasons were again hidden in the United States. However, nothing extraordinary happened in the States on the first trading day of the week. Therefore, it is impossible to connect the fall of the US currency with any fundamental or macroeconomic event. Thus, the technical picture of the euro/dollar pair on Monday did not change at all. We also expect the upward movement to continue due to the growing imbalance between the money supply of the European Union and the United States. Recall that the United States, unlike the EU, is pouring trillions of dollars into its economy, which stimulates it, but at the same time creates serious pressure on the exchange rate of the US currency and stimulates inflation. Already this week, the next inflation report is due to be released, which should jump immediately to 2.5% y/y. 2.5% is not much, but if the consumer price index accelerates further, this may become a serious problem for the Fed, which has been trying to disperse it for the last 10 years. Especially given the fact that the Fed is not going to raise rates in the near future and reduce the quantitative stimulus program, as Jerome Powell has repeatedly stated. We believe that this factor is now the most important, at least for the euro/dollar pair. The pound/dollar pair has its problems, which are unique to this pair. We will talk about them in the corresponding article. As for the global technical picture, everything is also unchanged. The pair grew for about 9-10 months, completed this process in early January 2021, then fell for three months (that is, corrected), respectively, now it can resume its upward movement within the global upward trend. Thus, the global trend and the global fundamental factor now predict the same scenario.
Today, I would also like to talk about the EU economic recovery fund, which is still not formed and not even ratified by all EU member states. However, it seems that there should be no problems here. The problem is time. Although the European Commission has stated that it intends to form a fund by the beginning of the summer and start distributing it among the beneficiary countries during the warm season (that is, everything seems to be going according to plan and on schedule), the difference between the approaches in the United States and the European Union is striking. If in the United States, the next package of stimulus measures for $ 1.9 trillion was adopted in a couple of weeks, and there is already a full discussion of a new package of stimulus measures, as well as the search for sources of funding, then in the European Union for more than a year, everyone has been pushing around the money of the recovery fund of only 750 billion euros. First, the amounts are very different. Secondly, the timing. Yes, during the time of Donald Trump, the stimulus package also "hung" in Congress for more than six months. However, at that time in the United States, there was an open political crisis named after Donald Trump, who conflicted with everyone, including Congress, whose lower house twice impeached him. But the European Union is sinking not because of a political crisis, but because of a banal bureaucracy. In the European Union, the mechanism for making any important decisions is too complex and lengthy. And this follows at least from the fact that the EU has 27 member states, and a global decision can be made only when representatives of all 27 countries say "yes" to the initiative under discussion. Thus, it is not surprising that any decision is made for six months (or more) since the interests of 27 countries should be taken into account at once. Recall that last summer, the economic recovery fund, and its distribution were also not immediately accepted. Only within the framework of the 4-day EU summit (which was originally planned for two days), it was possible to achieve the agreement of all countries. Thus, Europe allocates less money for reconstruction and does it very slowly. Everything is the same as in the vaccination procedure of the population. Little and slow. And it could be concluded that if the European economy lags behind the American one, then the euro currency should become cheaper in pair with the dollar. But just at the expense of the amounts that are allocated to stimulate the economy, the opposite process is happening. And the most interesting thing is that it is not profitable for the European Union to observe the growth of the European currency. Just like America – to observe the growth of the US currency. Thus, it turns out a paradox: the United States is recovering faster, stock markets continue to grow strongly, but the dollar is falling. This is great news for the United States (recall that Donald Trump has repeatedly said that America needs a "cheap dollar"). Excellent – because with a "cheap" dollar, it is easier to service your national debt and it is easier to export anything. The same is true in the European Union: the economy is recovering slowly, but the euro currency is growing, which puts even more pressure on the economy, as it becomes harder to export.
Thus, in the coming weeks or even months, we continue to expect a new round of growth of the European currency, although there are now objectively much less fundamental reasons for this than for its fall. We also remind you that any fundamental hypothesis requires specific technical signals and confirmations. Otherwise, it is not recommended to work out such a hypothesis.
The volatility of the euro/dollar currency pair as of April 13 is 62 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1854 and 1.1978. The reversal of the Heiken Ashi indicator downwards signals a possible round of a downward correction.
Nearest support levels:
S1 – 1.1902
S2 – 1.1841
S3 – 1.1780
Nearest resistance levels:
R1 – 1.1963
R2 – 1.2024
R3 – 1.2085
Trading recommendations:
The EUR/USD pair maintains an upward trend. 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.
