4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 73.4858
The EUR/USD currency pair finally "died" on Friday and was already trading even without a certain direction. In principle, the illustration below clearly shows how volatility has been falling in recent days. On Friday, this figure was only 44 points. Thus, nothing in the technical picture changed during the last trading day of the week. The price is still located above the moving average line, thus, the upward trend continues. So far, it takes only 2 weeks, however, we continue to count on the resumption of the global upward trend. That is, we expect that the upward movement of the euro/dollar pair will continue in the coming months. We have already discussed the reasons for such conclusions many times. In short: the American economy continues to pump trillions of dollars, which causes an increase in inflation in the United States and the depreciation of the national currency. In Europe, they go the other way and do not print money in trillions. Therefore, the money supply in the European Union is growing much weaker. Therefore, the European currency also gets an advantage. It depreciates more slowly than the dollar. We have already spoken about the paradox. Even though the euro is becoming more expensive in the long term, the European economy is recovering slowly, and the fact that the euro is growing is not very beneficial to the European Union. This was repeatedly stated a few months ago by both Christine Lagarde and the ECB's chief financier, Philip Lane. In the United States, the paradox is reversed. The economy is growing rapidly, however, the US dollar is declining, which is very beneficial to America. If you remember, Donald Trump has repeatedly stated that the United States does not need an "expensive" dollar, as this significantly complicates the process of servicing the national debt and makes American goods less competitive on international markets.
The fundamental background for the pair has been quite contradictory lately. On the one hand, there is news. On the other hand, what difference does it make if the markets don't pay much attention to them? Well, Christine Lagarde and Jerome Powell spoke last week. The first one said that the EU economy is in a bad state, the second one said that the US economy is recovering at a good pace, and so what? All the same, the euro continued to rise in price. We believe that the matter is not at all in the fundamental background. The factor of strong growth of the money supply in the United States overrides both the "macroeconomics" and the "foundation". Thus, all the news now has only a local impact on the movement of the pair. Yes, for example, the inflation report is coming out, and the US dollar is experiencing additional pressure. But in general, news and reports do not affect the euro/dollar pair to the extent that it changes its trend. And the trend, if anyone does not remember, remains upward in the long term. We consider all news such as vaccination in the EU and the US or the growth of government treasury bond yields to be insignificant for the foreign exchange market. It is clear that the lower the rate of vaccination of the population in the European Union, the longer the economy will recover. Longer and slower. But why should market participants react now to the news about the rate of vaccination, if you can respond to specific macroeconomic indicators for a particular period? Thus, the entire fundamental background now exists for traders to simply be aware of what is happening in the world.
According to the latest information, the EU authorities decided to refuse to cooperate with the pharmaceutical companies AstraZeneca and Johnson & Johnson in the future and not to order more vaccines from them. Recall that it is the vaccines of these companies that supposedly cause the formation of blood clots. Of course, we are talking about only a few cases of blood clots for millions of vaccinations. However, the popularity of these vaccines is declining, however, confidence in the Pfizer/BioNTech and Moderna vaccines is growing, which the European Commission plans to focus on in the coming years.
Meanwhile, the European Commission released a report revealing the organization's plans to raise 750 billion euros over the next five years to finance the recovery of the Eurozone economy after the coronavirus pandemic. The European Union plans to raise funds by issuing government bonds for a period of 3 to 30 years. The first bonds are scheduled to be issued in July, and their sale will begin in September. Brussels expects that short-term bills will help raise funds in the initial stages, and bonds will be placed through auctions. All the funds raised will be distributed among the EU countries in the form of grants and concessional loans. Thus, the EU economy will begin to accelerate earlier than the summer of 2021, but rather even closer to autumn. Of course, this does not mean that GDP growth will be zero in the first and second quarters. Most likely, it will be negative. It is already known that in the first quarter, most likely, a drop of 1.2% will be recorded, and in the second – it is still difficult to say, given the third "wave" of the epidemic in some EU countries and problems with vaccination of the population.
In a summary, we believe that nothing will change the overall market sentiment in the near future. Yes, a change in the market mood will not be necessary, since the euro currency is growing due to the imbalance in the money supply of the EU and the US. What difference does it make, as most traders do, if the number of dollars increases too quickly? COT reports have been showing for 5 months that the European currency should start a downward trend. However, this does not happen. Thus, the entire "foundation" and "macroeconomics" can only have a short-term impact on the movement of the euro/dollar pair. And given that the volatility of the pair has again decreased to the minimum values, we still need to wait for important news and reports to affect the movement of the pair.
The volatility of the euro/dollar currency pair as of April 19 is 48 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1934 and 1.2030. A reversal of the Heiken Ashi indicator downwards will signal a new round of 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 the targets of 1.2024 and 1.2030 until the new reversal of the Heiken Ashi indicator downward. It is recommended to consider sell orders if the pair is fixed back below the moving average line with targets of 1.1902 and 1.1841.
