4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 177.2902
On Wednesday, the EUR/USD currency pair continued its upward movement on the 4-hour timeframe, which began a day earlier. However, on Tuesday, the resumption of the upward trend was provoked solely by the report on inflation in the United States. The pair would have continued to stand in one place, as they had for the previous four days. However, the current technical picture remains the same. The price continues to be located above the moving average line, thus, the upward movement may continue in the coming days. Nothing but the inflation indicator has changed in recent days. In general, the fundamental background remained the same. Only inflation has increased sharply, giving rise to a lot of new rumors and speculation in all markets, including the currency market. Not that the acceleration of the consumer price index to 2.6% y/y was a surprise. The forecast was 2.5% y/y. However, the acceleration itself turned out to be very sharp. And if inflation jumped to 2.6% in March, it may accelerate even more in the following months. Recall that all the major central banks of the world (at least the ECB, the Fed, and the Bank of England) agree that inflation should fluctuate in the range of 2.0%-3.0% to ensure "healthy" and constant growth of the economy. However, recently, more and more central banks have voiced only the figure of 2.0% y/y, assuming that the value of inflation may be slightly higher. Thus, the further acceleration of the consumer price index above the level of 2.6% will be perceived by the markets as a negative moment. However, they also perceived the acceleration to 2.6% as negative, as the US dollar fell sharply after the publication of this report. Thus, the growing inflation, as we would not like to think otherwise, is a negative moment for the US currency. This may be great news for the US economy, but not for the US currency. Such is the paradox. Earlier, we talked about another currency paradox: the US government and the Fed are pouring trillions of dollars into the economy – the economy is recovering faster than anyone else in the world – the dollar is falling due to a strong increase in the US money supply – this makes the US economy work even faster since the country benefits from a cheap national currency. Thus, we continue to build on the conclusion that the US currency will continue to fall in price in 2021. The trillions of dollars poured into the economy cannot go unnoticed. All other factors are now frankly secondary. In the near future, market participants may begin to pay attention to the US statistics, which will be expressed by high economic growth rates. Perhaps this factor will even provide a little support for the US currency. However, it is still very difficult to imagine what should happen for the dollar to become more expensive in the long term.
Meanwhile, in the European Union, the third "wave" of the epidemic continues to intensify, which threatens to result in new stricter quarantines and "lockdowns", but at the same time, the shortage of vaccines is slowly decreasing. More precisely, it will begin to decline in the near future, as the EU authorities have agreed with pharmaceutical companies to supply 300-360 million doses of vaccines in the second quarter of 2021, which exceeds the figures of the first quarter by 4-5 times. Thus, if there are no problems in the production of such a huge number of doses and supplies, then by mid-summer, most of the EU population can receive the necessary vaccinations. Of course, some countries will form "collective immunity" faster, and some more slowly. We have already understood that there is no principle of equality in the distribution of vaccines among EU members. Some countries are even forced to make orders for the supply of vaccines in China, India, or Russia, as their vaccines in the European Union are sorely lacking. However, I would like to believe that in the near future the EU will still resolve the issue of supplies, which will significantly ease the pressure on the European Commission, as well as contribute to the restoration of business and economic activity in the EU countries. The main thing now is to overcome the third "wave" as painlessly as possible, get vaccinated as quickly as possible, and in the summer – start distributing the economic recovery fund and start recovering from the "coronavirus crisis".
However, Johnson & Johnson's vaccine was banned from use in the United States, and the company itself postponed deliveries to the European Union due to the formation of blood clots in several patients in America who were administered this vaccine. Recall that earlier a similar side effect was noted in the AstraZeneca vaccine, which later ceased to be recommended for use in many countries of the world. According to unconfirmed information, the European Commission has already decided to abandon future purchases of AstraZeneca and Johnson & Johnson vaccines, which are produced based on viral vectors. It is reported that the European Commission is going to make purchases only of vaccines with matrix RNA, which have instructions for the formation of the Spike protein, which is used by the "coronavirus" and allows the body to produce antibodies. Pfizer and Moderna vaccines have been developed on this principle.
What does all this potentially mean for the European currency? Only that in the second quarter of 2021, the EU economy can start to recover faster, and in the third (after the distribution of the recovery fund for 750 billion euros) – even faster. Although the European economy will in any case lag behind the American one, this is still good news for it. Thus, we still believe that the downward trend that began at the very beginning of January 2021 ended on March 31. Of course, the consolidation of the pair's quotes below the moving average line may again increase the chances of a decline, but for now, we are considering the option of further growth of the euro currency and the fall of the dollar.
The volatility of the euro/dollar currency pair as of April 15 is 56 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1921 and 1.2033. The reversal of the Heiken Ashi indicator downwards signals a possible round of a downward correction.
Nearest support levels:
S1 – 1.1963
S2 – 1.1902
S3 – 1.1841
Nearest resistance levels:
R1 – 1.2024
R2 – 1.2085
R3 – 1.2146
Trading recommendations:
The EUR/USD pair maintains an upward trend. Thus, today it is recommended to stay in long positions with targets of 1.2024 and 1.2085 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 1.1841 and 1.1719.
