4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 14.5388
On Wednesday, June 2, the EUR/USD currency pair again traded lower, as it once again failed to overcome its local highs in the range of 1.2243-1.2267. The bulls again retreated from this level, so the pair's quotes fell to the lower part of the side channel of 1.2160-1.2243, in which they spent most of their time in the last two weeks. And if so, then we can expect a rebound from the level of 1.2160 and the resumption of the upward movement. In principle, even on a 4-hour timeframe, the naked eye can see the movement sideways. At the same time, in general, the upward trend persists, and the price can not even begin a downward correction. It suggests that the bulls' position is still strong, and the Fed is still pouring hundreds of billions of dollars into its economy. Recall that we give a key role in the depreciation of the US currency to the Fed, which directly or through the US Congress saturates the economy with trillions of dollars, which leads to the devaluation of the national currency. The fact that the euro currency has now stopped growing (in the last two weeks) may indicate that the major players are actively selling the pair, which is why they oppose the actions of the Fed and the US authorities. We see a sideways movement on the charts as the Fed prints dollars and traders sell off the euro. It turns out that one factor levels the other, and the quotes eventually stand in one place. But we still believe that nothing is changing in technical terms. First, you need to wait at least for the pair to leave the side channel indicated above. Only after that will it be possible to conclude whether the upward trend will continue or a downward correction will begin.
Meanwhile, market participants have been doing their favorite thing in the last few days - panicking out of the blue. If you remember, a couple of months ago, there was a very fashionable topic of growth in the yield of 10-year treasuries in the United States, which was associated with any movement of the US dollar in the foreign exchange market. Now no one remembers about these treasuries. This factor immediately "ceased to act" on the foreign exchange market. In the past few weeks, it has also been fashionable to discuss why the Fed is inactive, and Jerome Powell is not announcing a reduction in the quantitative stimulus program. Market participants did not understand why, if the US economy is recovering rapidly, and inflation is growing before our eyes, the Fed does not announce its readiness to tighten monetary policy and curtail stimulus? Especially when you consider that we hear such hints even from the Bank of England representatives, where the economy is just beginning to recover from the crisis.
The positive value of GDP will be only in the second quarter of 2021. Now a new fashionable topic is an inflation. Inflation in the US, inflation in the European Union, inflation in the UK. Although all this time (the last 2-2. 5 months), the movement of the euro/dollar is frankly the same. The European currency is growing most of the time, and the US dollar is hardly even adjusted. But at the same time, they discussed the treasury, then the Fed's inaction, and now inflation. And nothing changes in the market. As the US dollar fell at low inflation, it continues to do so at high inflation. And in the UK, inflation is even lower than in the European Union. The most interesting thing is that representatives of the ECB, the Fed, and the BA have repeatedly expressed their immediate plans for accelerating inflation. The European Union and the UK said that inflation growth would not take long, and the indicator itself will not go much higher than the target value. The ECB has no plans to wind down its stimulus program before the previously announced March 2022 deadline. In the UK, they hinted that a rate hike would be possible next year, and even then, if several conditions are met. Inflation in the Foggy Albion is not expected at all above 2.5%, and it will begin to decline by itself. Even the influence of the regulator will not be required. The United States also warned that inflation will not rise forever and will also start to slow down in a few months. In general, none of the central banks we are interested in is panicking or sounding the alarm about accelerating inflation. However, this is the number one topic in the market right now.
Moreover, now it is not even possible to say that the last value of inflation in the European Union (for example) is final. In April and May 2020, with current prices being compared, inflation was almost zero. In economic terms, the latest inflation reports in the EU have a very low base (base value). Moreover, given the amount of money the ECB is pouring into the economy (much less than the Fed and quite a lot), it is not surprising that inflation in Europe is beginning to accelerate. Recall that only under the PEPP program, the EU economy should receive 1.85 trillion euros. Naturally, this money is also "taken out of thin air." Accordingly, they cannot cause price increases. In general, from our point of view, if inflation is now at least 2.5% every month and this value will hold for at least six months, and ideally a year, then you can panic and wait for decisive action from the central banks. In the meantime, especially in the European Union and the UK, the consumer price index has barely reached the target values. In general, the current level of inflation is the level that all central banks have sought in recent years, making any panic about rising prices even more absurd.
The volatility of the euro/dollar currency pair as of June 3 is 54 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2158 and 1.2267. A reversal of the Heiken Ashi indicator back to the top will signal a possible new round of upward movement within the side channel.
Nearest support levels:
S1 – 1.2207
S2 – 1.2146
S3 – 1.2085
Nearest resistance levels:
R1 – 1.2268
R2 – 1.2329
Trading recommendations:
The EUR/USD pair is trying to start a new round of upward movement. Thus, today it is recommended to open new long positions from 1.2268 after the reversal of the Heiken Ashi indicator to the top. It is recommended to consider sell orders if the Heiken Ashi indicator turns down with targets of 1.2158 and 1.2146. We also remind you that the pair is now moving into a flat.
