Although there were quite a few macroeconomic statistics and essential news and events last week, we could list a whole list of possible reasons for exactly such a movement of the euro/dollar pair as it is now. But the problem is that many of these factors contradict each other. The most banal example: the US economy is growing, which should have a beneficial effect on the dollar, but at the same time, the money supply is growing, which reduces the dollar exchange rate on the international market. Macroeconomic indicators are rising. However, the United States is set to raise many taxes, which may discourage many new large investors and even force some existing ones to flee. And now the whole "foundation" consists of such "twos" opposite in effect. Therefore, now you need to clearly understand which factors affect the euro/dollar exchange rate and which do not. We think that no one doubts that the fundamental background from the European Union does not play any role now.
The euro is growing again when the epidemiological and economic situation is objectively worse in the EU. The ECB openly compares the current state of the bloc's economy with "a patient who stands on two crutches". Thus, it is in the fundamental background of the United States, which is also quite contradictory. We have already mentioned above that on the one hand, the US economy is recovering at a very high pace, and it may be the first in the world to reach the pre-crisis trajectory of economic growth, according to the IMF. In about a year, the economy will be in such a state as if the crisis did not happen at all. The European Union can only dream of such a thing now. But it is the European currency that is growing at the same time. At the same time, both in the long term and in the short term. Therefore, it turns out that the fundamental background favors the euro currency. It turns out that we need to look for factors that are not working on the side of the dollar right now. It won't take long to find such a global factor. We've said a million times that the problem is the ballooning US money supply and multi-trillion dollar stimulus packages, and nothing has changed since then. As for more local factors, here you can pay attention to the actively exaggerated rumors about a possible increase in the number of taxes, mainly for wealthy Americans and for large corporations. At the same time, the topic of taxes remains the key one right now, and it can impact the American economy in the coming year.
You don't need to be an expert to understand that the higher the tax rates, the lower the interest of investors in this country. Of course, not everything depends only on taxes. Suppose the rates are high, but at the same time, the country has a huge market and huge business opportunities. In that case, you can pay high taxes, profits will still be disproportionately higher than in countries with low tax rates, but at the same time lower business opportunities. However, if the following situation occurs: business opportunities remain the same, and taxes are increased not by 5%, but twice. Then, with a high degree of probability, those categories of citizens who fall under the increase in tax rates will change their perspective about the attractiveness and unattractiveness of the investment climate in this country. It is what can happen in the States now. It does not mean that all millionaires and billionaires will immediately leave the country to avoid paying taxes. However, this means that a couple of trillions of dollars of capital can go "into the shadows". The shadow economy is not just about developing countries. In the United States, corruption and other "charms" are no less developed than Ukraine or Russia. How can we not remember the story of Donald Trump's taxes, when in the middle of his presidential term, it turned out that his companies had been making losses for a decade and had paid $ 600 in taxes to the US treasury? Who believes that the businessman and billionaire Trump does not earn anything through his companies? No, it just cleverly hides profits and cash flows. The same can happen to other billionaires and their cash flows.
Also, some capital may leave the United States altogether, as doing business may become more profitable outside of the United States. In any case, tax increases always reduce the investment climate. Thus, if the relevant legislation is adopted, then there is no doubt that the US dollar will receive another strong fall factor. Of course, such serious legislation still needs to be pushed through two chambers of Congress. However, recall that in both the lower and upper chambers, the Democrats have a majority. Therefore, everything will depend only on the Democrats. The Republicans are against raising taxes. They have always protected the interests of the country's wealthy population. However, even some Democrats are now reluctant to raise taxes. Therefore, even your votes may not be enough.
Nevertheless, it seems to us that the relevant legislation will be adopted. Thus, for 2021, the fundamental background for the dollar remains exceptionally unfavorable. And whatever it is now in the EU, the European currency has the highest chance of growing.
Trading recommendations for the EUR/USD pair:
The technical picture of the EUR/USD pair on the 4-hour chart is unambiguous. The upward trend is visible to the naked eye. Pullbacks within the upward trend are minimal. Thus, at this time, even the goals for trading are not particularly needed. The pair has just been growing steadily for more than two weeks and may continue this movement for another couple of weeks. Of course, a correction is now brewing. But until the price is fixed below the Kijun-sen line, there is no technical reason to start moving down. We believe that in the coming weeks, the price will aim for the level of 1.2343 – the maximum from January 6, 2021 – the maximum for the last 2.5 years.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
