4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 99.4382
The EUR/USD currency pair did not break even a millimeter out of its rut on Monday. Recall that the local upward trend has been going on for three weeks, during which time the euro managed to rise in price by 400 points. It is noteworthy that in recent weeks, with the next fall of the US dollar, there has been no talk about the reason for the fall of the US dollar. If at a time when the European currency was depreciating (the first three months of 2021), many experts said that the American economy was recovering faster than the European one, vaccination in the United States is much faster, and the crisis Donald Trump left office, and the much more conservative and calm Joe Biden came. However, now that the strengthening of the European currency has been going on for more than three weeks, discussing the reasons has somehow subsided. You only have to hear explanations like "the Fed has made it clear that it is not going to raise rates in the near future and wind down the asset purchase program." The fact that the ECB is not going to wind down the PEPP program in the near future and raise the rate, which is at the level of -0.5%, for some reason, these experts do not take into account. As a result, Nassim Taleb's situation in the book "The Black Swan" arises: an unusual phenomenon can be explained after the fact. It is what most experts in the foreign exchange market do. They explain what has already happened. In principle, it is not difficult to choose the right reason and say that the dollar is now getting cheaper. We continue to insist that the US currency will continue to fall in price in 2021. However, this is not obvious if we take into account only the usual macroeconomic and fundamental factors. Indeed, in recent years, when there were no new economic shocks in the world, we all got used to the fact that the state of the economy is a reason for the growth or fall of a particular currency. If the economy is weak, the national currency depreciates, which we constantly see in Russia, Ukraine, and other developing countries. If the economy is strong, the national currency can also fall, but only against a currency with an even stronger economy. Simply put, the euro may fall against the dollar. And the dollar against the euro may also fall. Because these are currencies with comparable economies. However, in 2020-2021, another global factor has emerged that cannot but influence the movement of major currencies. This factor is the injection of trillions of dollars or euros into the economy to revive it as quickly as possible after the crisis and pandemic. Thus, this factor has never been considered by traders or experts before since it has never been simple before. Economic stimulus programs have always existed, but remember what their volumes were? For example, the Fed buys assets from the market every month, in my opinion, since 2008, but what amounts are we talking about? From 2008 to 2016, the Fed's balance sheet increased by $ 2 trillion, and this was considered very much since it doubled from $ 2 trillion to $ 4. Then the Fed began to unload its balance sheet and did this until 2020, when the pandemic and crisis broke out, and then in a couple of months, the Fed's balance sheet doubled to almost $ 8 trillion. And if you add in the money that the US government borrows and then "throws it out of the helicopter" or sends it to help the most affected sectors? If we compare these values, it turns out that there are practically no stimuli in a normal, quiet time. They are so insignificant. Of course, we are still talking about billions of dollars, but these are nothing compared to the fact that the Fed and the US government have poured more than 10 trillion into the US economy over the past year alone. And this is a banal growth of the money supply with a constant number of created goods and services. American money has become more, and European money has also become more, but not so much. Naturally, the US dollar is falling. It does not care what the yield of government bonds is, what the pace of economic recovery is in the US and in the EU, where the epidemiological situation is, and so on. It becomes cheaper simply because there is too much of it. And this process will continue in 2021. If the ECB is also stimulating the economy in the EU, then the government has bitterly approved a $ 750 billion recovery plan that has not even been formed and distributed since last summer. And in the States this year alone, the government has already spent about $ 3 trillion to support the economy ($1 trillion remained unspent from the last stimulus package and another $ 1.9 trillion from Biden's "bailout plan"). Thus, everything is obvious for us. Of course, in the foreign exchange market, you can never be 100% sure of anything. Returning to Nassim Taleb, "there can always be a 'black swan' that will affect everything with such force that it will turn everything upside down and become the starting point for many new processes." And it is almost impossible to predict the appearance of such a "black swan." We can only assume that this or that cataclysm will happen sooner or later. For example, the US stock market will burst because many experts have long been paying attention to the "bubble" inflated in it over the past year or two. Anything can happen, but as long as nothing has happened yet, we believe that our theory has an excellent chance of being realized.
The volatility of the euro/dollar currency pair as of April 27 is 64 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2021 and 1.2147. The upward reversal of the Heiken Ashi indicator signals the resumption of the upward movement.
Nearest support levels:
S1 – 1.2085
S2 – 1.2024
S3 – 1.1963
Nearest resistance levels:
R1 – 1.2146
R2 – 1.2207
R3 – 1.2268
Trading recommendations:
The EUR/USD pair maintains an upward trend. Thus, today it is recommended to open new long positions with a target of 1.2146 after the reversal of the Heiken Ashi indicator upward. It is recommended to consider sell orders if the pair is fixed below the moving average line with a target of 1.1963.
