The European currency paired with the US dollar is mostly in one place in the last three weeks. It is despite the impressive drop this Thursday. It can not be called a classic flat. However, the quotes are in a minimal range. At the same time, the pair corrected slightly against the last round of the upward movement. However, this correction is very weak. At the end of this week, we realized once again that the bears are very weak, and the dollar is looking for any reason to continue falling. In principle, it would drop even without macroeconomic statistics. However, the macroeconomic data, which traders interpret mainly against the US currency, also help the dollar to refrain from strengthening.
A vivid example of this was this Friday. Nonfarm payrolls were weaker than traders' expectations. However, the unemployment rate fell, and wages rose. Thus, the dollar hardly deserved such a severe fall. In addition, I would like to note that the markets are susceptible to forecasts. According to NonFarm Payrolls, the forecast was 645K, and the actual value was 559K. What if the forecast was 400K? Would the dollar then continue to rise? In general, the statistics are now very ambiguous. Despite such "weak" data as on Friday, the US economy is still recovering much faster and stronger than the European one.
Thus, how can we say that the dollar is falling because of statistics if these statistics are better than in Europe? In general, we continue to believe that statistics directly impact the euro/dollar exchange rate. On Thursday and Friday, the markets did react to the publications. Thus, we continue to believe that the key influence on the pair's movement is provided by global factors, which we have already discussed a million times. However, what can you do if they have the most significant impact? What is the point of trying to write off the fall in the dollar on the yield of 10-year treasuries or other temporary factors that do not affect the dollar? Based on all of the above, we can conclude that the US currency is likely to continue to fall in price in 2021. Of course, any fundamental hypothesis must be confirmed by technical signals. If the pair is fixed below the critical line next week, the upward scenario will be temporarily irrelevant. It would be best if you always had a backup option in your pocket. It is worth remembering that on a pure "technique," the pair can also trade calmly.
As for the statistics and important events next week, there will be very few of them. In the European Union on Tuesday, the index of business sentiment from the ZEW institute will be released and the volume of GDP for the first quarter in the second estimate. No more important macroeconomic reports are scheduled for the week. On Thursday, the results of the ECB meeting will be summed up. However, no changes in monetary policy or even the rhetoric of the European regulator are expected. In light of this, the most attention will be paid to the press conference with Christine Lagarde. However, all her recent speeches and statements clarify that no special changes are planned in the near future. Inflation may continue to accelerate. At the moment, the consumer price index is growing. However, the base of the latest indicators was very low (the months of last year, with which the comparison is being made), and it is growing after several years of being much below the ECB's target levels.
Moreover, the growth of European inflation is not comparable to the growth of American inflation. 2% is the normal rate of inflation, so there is no panic about it in Europe at all. As for the PEPP emergency economic assistance program, it clearly will not be curtailed earlier than planned in March 2022. And its volume of 1.85 trillion euros is also unlikely to change, given that the European economy has just begun to recover. Of course, there can always be surprises, and you should not take Lagarde's speech lightly, as Boris Johnson did with the virus at the beginning of the pandemic. But at the moment, everything looks as if there will be no surprises.
Separately, I would like to note that trade negotiations between China and the United States have resumed. Last week, US Treasury Secretary Janet Yellen and Chinese Vice Premier Liu He held fruitful talks. However, it is only about "discussing important issues." We can hardly expect significant progress in the negotiations and the conclusion of new trade deals in the near future. Thus, the trade confrontation between China and the West persists, as do most of the trade duties introduced a few years ago. This topic is unlikely to have a severe impact on the dollar in the near future.
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 continues, despite the semblance of a correction that began in recent days. The price has not managed to gain a foothold below the critical line (yet), which means that the bullish mood persists. The same conclusion can be drawn from the COT reports, which show that the big players either increase their longs or get rid of their shorts. Therefore, we are waiting for the resumption of the upward movement with targets near the level of 1.2350. Therefore, trading for an increase remains a priority. On the lower timeframes, downward trends can also form, but as the practice of recent weeks has shown, there is more and more like a flat.
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.
