On Monday, the EUR/USD currency pair exhibited no unusual behavior. And what is unusual now is that the euro has not experienced a new decline. Therefore, we were not surprised when the European currency continued to decline despite an empty calendar of events on Monday. The fall was not particularly severe; it can be described as "walking." However, the euro currency continues to depreciate almost every day. As stated previously, a tool cannot indefinitely move in a single direction. This implies that upward corrections and pullbacks will occur. However, this does not imply that one of those will commence immediately. As has been stated numerous times, most factors and circumstances continue to support the US dollar, and traders have no reason to buy. Thus, all left is to follow the trend, as it would be highly illogical to purchase a pair during a strong downward movement.
In the meantime, the seventh package of sanctions against Russia is being vigorously debated in the European Union. Recall that, as of today, Moscow has halted gas supplies to the European Union via the Nord Stream pipeline, citing maintenance needs. It is currently unknown whether this is the actual situation or the Kremlin's response to the blockade of the Kaliningrad region, about which we have previously written. Regardless, there should be a seventh package, but it is currently unknown if the "gas embargo" will be included. Various experts express different perspectives. Someone asserts that the seventh package will be a continuation of the sixth, with the closure of several loopholes. Someone stated that refusing to purchase gas would be a powerful new blow to the Russian economy. Relations between the European Union and the Russian Federation continue to deteriorate in one way or another.
Preview for the new week
The macroeconomic environment has not had a global impact on the euro/dollar pair's movements for a very long time. The market does not always process the data it receives from the United States or the European Union logically or straightforwardly. For example, strong non-farm caused a dollar decline last Friday. However, it would not be prudent to disregard macroeconomic statistics completely. Moreover, there won't be much of it this week. There was and will be none in the European Union on Monday and Tuesday. On Wednesday, we will see a report on industrial production that is by no means the most significant given current conditions. Nothing on Thursday and Friday. In addition, Christine Lagarde may deliver a speech that is not yet scheduled. Therefore, traders will be able to concentrate solely on American data and will have something to focus on.
We should begin with the American inflation report, which the same number of individuals will now follow as bitcoin was during its most recent "bullish" trend. This report's forecasts are already known, and they are disheartening. Inflation may reach 8.8% y/y by June, despite the Fed's rate increase to 1.75%. Even derivatives of the primary indicator, such as core inflation and the producer price index, will not be considered. We believe that although the Fed says it pays more attention to the base value, it does not turn a blind eye to the main indicator. Therefore, if the consumer price index accelerates, it will be a catastrophic failure. It is unclear why we are only discussing a rate increase to 3.5%, given that we have already reached 50% of this threshold and inflation continues to rise. In any case, the new acceleration of inflation will ensure that the Federal Reserve will not deviate from its planned course of aggressive monetary policy tightening. This indicates that the US dollar will continue to receive market support in the face of this factor. Well, there is no point in discussing technical analysis at this time. There are no buy signals because all indicators are pointing downwards.
As of July 12, the average volatility of the euro/dollar currency pair over the previous five trading days was 130 points, which is characterized as high. Thus, we anticipate that the pair will trade between 0.9937 and 1.0199 today. A reversal of the Heiken Ashi indicator to the upside will indicate a fresh attempt to correct it.
Nearest support levels:
S1 – 1.0010;
S2 – 0.9888;
S3 – 0.9766.
Nearest resistance levels:
R1 – 1.0132;
R2 – 1.0254;
R3 – 1.0376.
Recommendations for Traders:
The EUR/USD pair resumed its steep decline. Until the Heiken Ashi indicator rises, it is necessary to maintain short positions with targets of 0.9937 and 0.9888. When the pair is fixed above the moving average with targets of 1.0376 and 1.0498, purchases will become relevant.
Explanations for the figures:
Channels of linear regression – aid in determining the current trend. If both are moving in the same direction, the current trend is strong.
Moving average line (settings 20.0, smoothed) – determines the current short-term trend and trading direction;
Murray levels – movement and correction target levels;
Volatility levels (red lines) represent the price channel in which the pair is likely to trade tomorrow, based on current volatility indicators.
The CCI indicator – its entry into the oversold area (below -250) or overbought area (above +250)- indicates a trend reversal.
