4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -88.3015
On Thursday, May 13, the EUR/USD currency pair was trading less actively than on Wednesday. However, there is a sense of concern in the foreign exchange market. The markets do not know what to do in connection with the growth of US inflation to 4.2% in annual terms. Recently, only a lazy person has not talked about inflation in the United States. And although the representatives of the Fed, led by Jerome Powell, have repeatedly urged not to worry about this, the markets can not help but worry, as inflation eats up their money. However, what else could you expect from this indicator if the Fed and the US Congress have poured trillions of dollars over the past year to stimulate the economy? What else could you expect if only the accounts of Americans over the past year accumulated $ 1.5 trillion, which was nothing more than a deferred demand? Now vaccination in the United States is almost faster than anyone else in the world, respectively, the fear and caution of the American population recede, and it begins to spend money again. Spending money on entertainment, which has been virtually nonexistent over the past year. Spend on expensive goods that were bought in smaller quantities in the last year. Who, for example, changed their car when a pandemic is raging in the country and quarantine is imposed everywhere? The same can be said about furniture or repairs of houses and apartments. Now that vaccines are plentiful and it is only a matter of time before the population in the United States is fully vaccinated, people have relaxed and started spending cash reserves. There are also no questions about where the huge cash flows were directed over the past year. Look at how the cryptocurrency market has grown and how the stock market has grown, and you will no longer have questions about where the lion's share of all the dollars introduced into the economy has gone. Therefore, the fall of the US currency now is normal. The money supply is growing, and it does not matter whether it is cash or money in bank accounts. There are no more goods and services, and there is much more money. Plus, we should not forget that the dollar is an international currency. Dollars and gold account for the lion's share of almost any central bank's gold and foreign exchange reserves. Many of the world's economies depend directly on the US currency. Almost every citizen of the former Soviet Union has a dollar, and anyone in the former USSR will tell you in which currency it is best to keep their savings. It means that there is a demand for dollars all over the world. For comparison, how many readers have ever seen or held yuan or Australian dollars in their hands? Therefore, in global terms, the world of dollars will, in any case, become more and more every year. It means that the Fed will constantly print new dollars and release them into the economy. Thus, the US currency is in an eternal process of depreciation. Another thing is that with some currencies, the dollar is always growing. In relation to some, it remains more or less stable in the long term (for example, the euro). Because in those other countries, there is also inflation, and it also eats up the value and purchasing power of money. In general, we can say the following: inflation is a normal process, and it exists in any country. The reasonable rate of inflation for the economy is 2-3% per year. Now in the United States, it has grown to 4.2%. Compared to April last year, when the world plunged into one global "lockdown." In April last year, inflation in the United States was approaching zero. Prices did not increase compared to April 2019 at all. Therefore, the current inflation indicator has a very weak base (the base month of comparison). Thus, the current inflation rate would be 2% if it did not fall to zero in April 2020. It is exactly what Jerome Powell and other Fed officials meant when they talked about compensating for periods of low inflation. The level that the Fed has been aiming for all these years is a stable 2% per year. Since prices have been rising by less than 2% year-on-year for most of 2020, inflation will now be allowed to remain at 3-4%. The weakest in terms of inflation was in May last year. Consequently, by the end of May this year, inflation may rise even to 5%, but it will inevitably begin to slow down. Thus, it will be important to look at the whole picture here. For example, on the inflation figures for six months or even a year. If, for example, in November of this year, inflation is fixed at 5%, then the Fed is likely to announce the curtailment of the quantitative stimulus program. And this is exactly what Jerome Powell has said more than once. However, investors continue to panic, and this is also absolutely normal. During the inflation release on Wednesday, the euro/dollar pair was tossed from side to side. On Thursday, the pair again flew up and down, although not as much as the day before. US stock indices fell for the third day in a row. All this suggests that there is a redirection of capital among the markets. And it is also absolutely normal when something changes dramatically in the economy. Thus, it may really "slow down" a little in the near future, but in the global plan for the US currency for 2021, nothing changes. We still expect the euro/dollar pair to rise.
The volatility of the euro/dollar currency pair as of May 14 is 70 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2006 and 1.2146. A reversal of the Heiken Ashi indicator to the top will signal a possible 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 has consolidated below the moving average and is currently in a downward movement. Thus, today it is recommended to stay in short positions with the targets of 1.2024 and 1.2006 until the Heiken Ashi indicator turns up. It is recommended to consider buy orders if the pair is fixed above the moving average line, with targets of 1.2146 and 1.2207.
