4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 105.1586
The EUR/USD currency pair continued its upward movement for most of Tuesday, April 20. Thus, after the pair has already passed up almost 400 points, the downward correction has not started. The mood of the bulls is now great, although traders in principle may have nothing to do with the strong growth of the European currency at this time. Or better to say "to a strong fall in the US currency", because the pound is also growing at this time. There are times when every day there are new messages, news, events occur and macroeconomic reports are published. Then you have to try to put all this information together and understand how all these factors will generally affect a particular pair. Now there is nothing to analyze properly. No important macroeconomic statistics were published on Monday or Tuesday, neither in the US nor in the EU. There were no unplanned events or performances either. By and large, there were no changes in the fundamental background, nor were there any new macroeconomic background. That is, in the literal sense of the word "nothing". Nevertheless, the euro/dollar pair rose 65 points on Monday and added a few dozen points on Tuesday. It seems to be a little, but at the same time, the pair has gone up almost 400 points in total. From our point of view, in the last few months and the next few months, everything will depend on only two factors. The first one is technical. We have already said that for almost the entire year 2020, the pair was inside an upward trend. Therefore, three months of downward movement in 2021 is a pure correction. What happens after the correction is completed? The resumption of the upward trend. From our point of view, this is exactly what is happening now. The second factor is fundamental - the pumping of the US economy with dollars, and we talk about this factor almost every day because there are no other reasons for the strengthening of the European currency now. Based on which the euro currency is now generally growing, if the US economy is recovering much faster, vaccination is taking place at a high rate, and the pandemic is receding overseas? That is, in the European Union now everything is exactly the opposite. From our point of view, the pair may take a short break near the level of 1.2090, where the Senkou Span B line of the Ichimoku indicator passes on the 24-hour timeframe. A rebound from this line can trigger a round of downward correction.
What else can affect the euro/dollar exchange rate in the near future? We believe that almost nothing. The American economy is pumped with a lot of money, so this factor is extremely important and overrides other factors. Of course, in the short term, traders can react to macroeconomic statistics or the speeches of central bankers in any way they want. But the global trend will not change. For the fall of the US currency to stop, the flow of trillions of dollars into the US economy must stop. And it won't stop in 2021. First, the US Congress and Joe Biden have just begun implementing the first $ 1.9 trillion stimulus package. Secondly, the US government wants to adopt a second stimulus package for another $ 2.6 trillion by the summer. Third, Americans with the weakening of the pandemic will get the accumulated $ 1.5 trillion from under the pillows and realize the deferred demand. Fourth, the Fed is not going to wind down its quantitative easing program, which involves buying $ 120 billion worth of bonds every month. Thus, a huge amount of money will flow into the US economy this year. Therefore, nothing will change. In the European Union, meanwhile, they can not deal with even one recovery fund. Although the EU economy is among the top three in terms of GDP in the world, the EU authorities do not stimulate it very much (compared to the same States). Thus, much less money is poured into the economy, so the euro currency depreciates much more slowly. This is good for the euro but bad for the European economy itself. Plus, in Germany, France, and some other EU countries, new "waves" of the epidemic and new "lockdowns" have begun, which will slow down the recovery. And vaccination of the population is still uneven and slow. The situation may improve slightly in the second quarter of 2021, but it is still too early to say.
This week, perhaps the most interesting event will be the ECB meeting. However, the issues that will be resolved at it are unlikely to have a significant impact on the European economy and the euro exchange rate. The bids are 100% likely to remain unchanged. The scope of the PEPP program is the same. Thus, we will only talk about the rate of bond repurchase from the open market. Recall that at one of the last meetings, the ECB announced an increase in the pace of asset purchases to counter the growth in government bond yields. We managed to stop the growth. Thus, the ECB has achieved its goal. Will the pace of asset purchases decrease now, or will they remain the same? How long will the PEPP program last? As mentioned earlier, until March 2022 or longer, given the weak pace of the EU economic recovery? Christine Lagarde herself said recently that the EU economy is now comparable to a patient after surgery who relies on two crutches to stand on his feet. These "two crutches" are fiscal and monetary stimulus. And if they are removed, "the patient will fall". Thus, there is no question of any tightening of monetary policy now. Therefore, this week the ECB is likely to leave all the parameters unchanged.
The volatility of the euro/dollar currency pair as of April 21 is 57 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1971 and 1.2085. The reversal of the Heiken Ashi indicator back to the top will signal the resumption of the upward movement.
Nearest support levels:
S1 – 1.2024
S2 – 1.1963
S3 – 1.1902
Nearest resistance levels:
R1 – 1.2085
R2 – 1.2146
R3 – 1.2207
Trading recommendations:
The EUR/USD pair maintains an upward trend but has started to correct. Thus, today it is recommended to open new long positions with targets of 1.2024 and 1.2085 if the Heiken Ashi indicator turns up or the price bounces off the moving average. It is recommended to consider sell orders if the pair is fixed below the moving average line with targets of 1.1902 and 1.1841.
