4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: -199.6365
On Monday, July 27, the EUR/USD currency pair tried to start a new round of upward movement. In the current conditions, all the movements of the euro/dollar pair and its attempts to show something look very conditional, since, on the one hand, the downward trend remains, and, on the other hand, the pair have been standing in one place for more than a week. We have repeatedly drawn traders' attention that most of the way down that the pair has overcome over the past couple of months, it made a few days after the last meeting of the Fed. And this week, there will be a new meeting of the Fed. We continue to expect that the current round of the downward movement will end. And, from our point of view, more factors speak in favor of this every day. First, we have already said that we see the level of 1.1700 – the target level for the current round of the corrective downward movement on the 24-hour timeframe. And at this time, the price is near it. Secondly, in the last few weeks, it is visible that the downward movement is weakening and slowing down, which is the best indicator that the bears do not see any grounds for selling the pair. Third, the fundamental global factor of injecting trillions of dollars into the American economy is not going away and can still harm the dollar. Fourth, the Fed does not give specific signals and signs that monetary policy may be tightened in the near future (although closer to this step than the ECB or the Bank of England). Thus, the US currency may resume falling in the near future. It should also be noted that the pair has been moving with minimal volatility in recent weeks. For example, last Friday, with macroeconomic statistics, the price went from the minimum to the maximum of 33 points. In general, the movements are now as weak as possible and as inconvenient as possible for traders. As for macroeconomic statistics, there was practically no such thing last week.
Now let's look at what awaits us this week. I want to note that there will not be many macroeconomic publications and fundamental events right away. There were no important events on Monday. On Tuesday, the US will publish a conditionally important report on orders for durable goods and an indicator of consumer confidence, which are unlikely to cause some reaction from traders. On Wednesday, perhaps the week's main event will take place – the summing up of the next meeting of the Fed. On Thursday, data on US GDP and applications for unemployment benefits will be published. On Friday – data on inflation, GDP, and unemployment in the European Union and a couple of secondary reports on personal income and expenses in the United States. Thus, it is already evident that the key role this week will be played by the Fed meeting and a press conference with Jerome Powell on Wednesday. But what can we expect from this event? And is it possible to expect anything at all? Recall that the last meeting of the Fed was held under the auspices of Powell's mere phrase that the monetary committee may begin discussing the curtailment of the quantitative easing program in the near future. It is all that traders could pay attention to and eventually paid attention to. No changes in monetary policy have occurred and have not been announced.
Moreover, in all subsequent speeches, Powell disavowed what was said then. Not once did he say another word about the fact that the Fed will discuss the QE program and its completion in the near future. From this, we conclude that Powell may have voiced it without thinking properly. The Fed and the American economy are still absolutely not ready to complete the stimulus program, as American investors want. After all, investors are afraid of their capital, which is devalued due to high inflation. They want the regulator to start taking measures to curb inflation, and they are interested in the labor market insofar as. But the Fed is just more interested in the labor market and the fact that 7 or 8 million more Americans are unemployed than the pre-pandemic indicators. Accordingly, the Fed is going to stop stimulating the economy only when the labor market fully recovers. It is not in 2021 since the labor market is unlikely to grow by 7-8 million over the remaining five months. Recall that the average value of NonFarm Payrolls is about 0.5 million new jobs per month. At the same time, it should be understood that there are also jobs that have closed in addition to the created places. The US economy can count on an increase in the labor market by 300-400 thousand per month. Thus, we believe that the Fed will not tell anything new to traders at the current meeting.
How can all this affect the euro/dollar pair this week? By and large, all macroeconomic statistics can be ignored or provoke a minimal market reaction. However, traders will not be able to pass by two indicators of GDP. Inflation in the EU is now so low that no one is even interested. Thus, it is the event on Wednesday that is the key.
The volatility of the euro/dollar currency pair as of July 27 is 52 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.1759 and 1.1863. A reversal of the Heiken Ashi indicator downwards signals a new round of downward movement.
Nearest support levels:
S1 – 1.1780
S2 – 1.1719
S3 – 1.1658
Nearest resistance levels:
R1 – 1.1841
R2 – 1.1902
R3 – 1.1963
Trading recommendations:
The EUR/USD pair has overcome the moving average and will try to start a new upward trend. Thus, today, you should stay in long positions with targets of 1.1841 and 1.1863 until the Heiken Ashi indicator turns down. The sale of the pair will be possible no earlier than the price-fixing back below the moving average line with targets of 1.1759 and 1.1719.
