4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 101.7050
The EUR/USD currency pair continued its upward movement on Thursday for most of the day, which began the previous evening after the Fed announced the meeting results. Jerome Powell spoke at a press conference. Now, look carefully at the illustration above. The market reaction to the Fed meeting is the last block of purple bars. Do you see any difference between this block and at least 7-8 similar ones before? Everything that happened yesterday is the same upward movement that was observed during the previous three weeks. In other words, the markets, after the results of the meeting became known, continued the same trading mode as before. Nothing has changed.
Moreover, the Fed did not surprise the markets, as the meeting was as "passable" as possible. Nevertheless, the US currency fell again. In total, this process has been going on for almost a month, and during this time, the pair's quotes have added 450 points. It seems to be not very much, but at the same time not a little, and there were no corrections at all during this time, only pullbacks. Thus, from our point of view, all the factors that affect the euro/dollar pair at this time have not changed at all. We still believe that the quotes have adjusted sufficiently after the upward trend of 2020 and have now resumed it in global technical terms. The main reason is the too strong increase in the money supply in the United States. The dollars have become more banal, which lowers its rate against other currencies. In recent articles, we also compared the pace of recovery of the US and EU economies. We found out that the US economy will already surpass the European economy in recovery at the end of the first quarter. Still, until that moment, the EU economy remained the leader since it lost much less in the second quarter of last year. Thus, formally, the US dollar may receive a strong support factor in the near future, but the second quarter has already begun, and the US currency has been declining.
We can't say that much depended on yesterday's Fed meeting. We immediately warned that Jerome Powell and the company are unlikely to do anything and even want to surprise the markets. The key rate remained unchanged at 0-0.25%, as did the Fed's rhetoric in the cover letter. In the final communique, it was said that the parameters of monetary policy would remain the same until the employment level reaches pre-crisis levels, and inflation will not be stable at 2%+. Jerome Powell himself said that the US economy is still far from fully recovering, so now it makes no sense to even talk about a possible curtailment of the quantitative stimulus program or an increase in the rate. However, no one expected a rate increase. However, some traders and experts were still waiting for hints of possible curtailment of the QE program against a rapid economic recovery background.
We immediately said that this is pointless since the Federal Reserve will wait for stable high results before tightening monetary policy. And Jerome Powell previously noted that the regulator would announce the curtailment of the QE program in advance, and this will not come as a surprise to anyone. Separately, the final communique also spoke about the COVID epidemic, which still poses high risks to the economy in the United States and the rest of the world. Thanks to vaccination and strong incentives, economic and business activity in the United States has increased, and employment has begun to recover. However, some sectors have been very seriously affected by the pandemic and are still in poor condition, the communique says. Inflation has increased, but it reflects a short-term perspective. It is too early to conclude. Financial conditions remain favorable, and the future trajectory of economic recovery will depend on the epidemiological situation in the United States. At this time, despite the vaccination, the risks to the economy remain high. The Fed also notes that it is not enough to achieve victory over the pandemic in the United States. The economy is tied to many countries where vaccination has not even begun yet or is proceeding slowly. Therefore, according to the Fed, the whole world must be cured of the pandemic. The FOMC once again noted that it would make all necessary efforts to support the American economy. As goals, Powell once again called the level of maximum employment of the population and inflation at 2% in the long term. Since inflation has recently been much lower than 2%, the Fed will allow it to accelerate above 2% and remain at this level for a certain time to compensate for periods of low inflation. Here is a rough summary of what the Fed and Powell said yesterday. All this information is repeated from time to time by the Fed Chairman himself or other monetary committee members. Thus, although the US dollar reacted with a fall to the meeting results, from our point of view, it would have continued to fall in any case.
From a technical point of view, the situation has not changed at all. The price is still located above the moving average line, so the upward trend remains upward. It is recommended to trade using the "Linear Regression Channels" system for an increase. If the price is fixed below the moving average in the near future, this will signal the beginning of a downward correction, but while the upward trend persists, it is necessary to work it out. Moreover, over the past month, the price has never even tried to form a false breakout of the moving average.
The volatility of the euro/dollar currency pair as of April 29 is 62 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2055 and 1.2179. A reversal of the Heiken Ashi indicator to the top will signal 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 the goals of 1.2146 and 1.2179 after the reversal of the Heiken Ashi indicator to the top. It is recommended to consider sell orders if the pair is fixed below the moving average line with a target of 1.2024.
