The EUR/USD currency pair started a new round of correction on Wednesday if the movement up by 50 points can be called a "correction" at all. Nevertheless, it is not necessary to count on more now. This week is "Easter". At least, a very small number of events and publications are planned in the States and the European Union. During the first three trading days of the week, there was not a single really important event or macroeconomic report. Perhaps only the speech of the main "hawk" at the Fed, James Bullard, can be called interesting. Interesting, but not too important and certainly not discouraging. The fact is that Bullard, in his usual manner, managed to make so many statements during one speech that it is now unclear what exactly was said will be implemented. The head of the St. Louis Fed announced a possible rate increase in May by 0.75% at once, a possible rate increase by 0.5% at each of the next six Fed meetings, and a possible rate increase at each of the next 10 meetings.
In general, the rhetoric of the Fed representatives is intensifying, tightening, and becoming more "hawkish". In practice, this has long been known to traders. And it has probably even been taken into account in the current exchange rate of the US dollar. If the neutral rate level is 2.5%, and the target is 3.5%, then no matter how you strengthen the "hawkish" rhetoric, you will not go above these goals anyway. The key rate is not inflation, which seems to be possible to control, but in fact, it does not always work out. The higher the rate, the more the economy "cools down", so you can't raise it too high either. Already yesterday, information began to arrive from various sources that the Fed, if it does not achieve its inflation target, in order not to undermine Americans' confidence in itself, may simply raise the inflation target. It should be noted that this method is used by many rulers, heads, high-ranking officials, and everyone who is in power one way or another. If you can't achieve the goal, then you need to change the goal, and then achieve it and declare victory.
The conflict in Ukraine did not go according to the scenario of the Russian Federation.
It is along this path, it seems, that the Kremlin is now going. The "military operation" in Ukraine has been going on for two months and, to be honest, in two months it is difficult to even answer the question: what goals is the Kremlin pursuing now? Initially, it was said that the goal was "denazification" and "demilitarization" of Ukraine. Now representatives of the Kremlin are talking about the "liberation of Donbas." The most important claim to Ukraine was its desire to join NATO. But already in the first month of hostilities, it became clear that Ukraine would not be taken into any NATO in the next 10 years for sure. Then what's the point of this whole operation? Why should it be continued? If in the Donbas it was possible to say that the Kyiv authorities were oppressing the Russian-speaking population, which needed to be protected, then in Kyiv, which was bombed, there was no need to protect anyone. In general, the longer this operation continues, the more it becomes clear that either the announced goals are just a screen, or the Kremlin itself does not quite understand what they want to achieve from Ukraine.
The most interesting thing is that NATO will now increase its presence on the borders with Russia anyway. First, let us recall that Estonia and Latvia are members of NATO and have a common border with the Russian Federation. And this border is located very close to St. Petersburg. Second, Sweden and Finland are likely to apply for NATO membership this summer. And Finland has a 1000-kilometer border with the Russian Federation. And, accordingly, NATO bases will be located near it. That is, if there had not been this conflict in Ukraine, Helsinki would have remained in a neutral status. But not anymore. Moscow will now have to either strengthen the Finnish border with weapons and military bases or conduct another special operation already in the Scandinavian country. As for Ukraine, it has not joined NATO, but actively uses NATO weapons. Weapons, heavy equipment, and armored vehicles are actively pouring into Ukraine, so it's not even clear why Ukraine needs NATO if it uses weapons from Western countries without joining the bloc?
The average volatility of the euro/dollar currency pair over the last 5 trading days as of April 21 is 75 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.0774 and 1.0924. The reversal of the Heiken Ashi indicator downwards signals a new round of downward movement.
Nearest support levels:
S1 – 1.0742
S2 – 1.0620
S3 – 1.0498
Nearest resistance levels:
R1 – 1.0864
R2 – 1.0986
R3 – 1.1108
Trading recommendations:
The EUR/USD pair has consolidated above the moving average line, but the growth may be short-lived. Thus, now it is necessary to open new short positions with targets of 1.0742 and 1.0620 if the pair returns below the moving average. Long positions should be kept open with targets of 1.0924 and 1.0986 until the Heiken Ashi indicator turns down.
Explanations of the illustrations:
Linear regression channels - help determine the current trend. If both are directed in the same direction, then the trend is strong now.
Moving average line (settings 20.0, smoothed) - determines the short-term trend and the direction in which trading should be conducted now.
Murray levels - target levels for movements and corrections.
Volatility levels (red lines) - the likely price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator - its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.
