4-hour timeframe
Technical details:
The direction of the higher linear regression channel is downward.
The direction of the lower linear regression channel is upward.
The direction of the moving average (20; smoothed) is upward.
CCI: 42.3799
The EUR/USD currency pair started a round of corrective movement on Wednesday. The pair passed without a single pullback over the past two weeks, nearly 400 points to the top, and the correction has been brewing for at least a few days. At this time, the only question is how strong this correction will be. We continue to insist that the pair has already resumed its global upward trend. First, based on technical factors. Secondly, based on the "global fundamental factor" about flooding the American economy with trillions of dollars. Thus, even if the euro/dollar pair now falls by 100-200 points, this will not change anything. After the completion of the correction, we will expect the upward trend to resume. As for other fundamental and macroeconomic factors, there is nothing to pay attention to now. There are no solid and important essential factors, and there are no macroeconomic statistics published in the first three days of this week. Thus, traders now have nothing to react to.
Since no important information is being sent to the markets right now, most traders and analysts try to "explain" the current movement of the pair with anything. We would like to immediately remind you how the foreign exchange market works in general. First of all, it focuses mainly on prominent players: various banks, corporations, and brokers. Thus, these financial institutions, which move the foreign exchange market, do not need either a fundamental background or macroeconomic statistics to make transactions. The purchase/sale of a particular currency is not only to make a profit from it. The bought currency is for international payments, investments, and trading operations. Also, the central bank can purchase the currency for reserves and many other purposes. There is no denying the influence of the fundamental background and statistics on the exchange rate formation of any pair. After all, there are also large speculators in the market (the same banks and other financial structures, but who make currency transactions to make a profit). If the pair moves in one direction or another, this does not mean that there is any fundamental factor that is the cause of what is happening. We remind you that the exchange rate of any currency is the ratio of supply and demand for this currency. This is why we believe that the US dollar will continue to fall in price in 2021. Because the dollar supply is growing because of all the stimulus packages from the US government and the Fed. Thus, if the dollar is now getting cheaper, it does not mean that the fundamental background in the US is now bad and/or in the European Union, it is now good. This may mean that demand for the dollar has declined in recent weeks or that demand for the euro currency has increased.
The supply of the dollar has increased and/or the supply of the euro currency has decreased. Here's how it works. Therefore, all the explanations that the dollar is currently falling due to the declining yield of US treasury bonds are just an attempt to "explain" what is happening. The pair can move with any force and in any direction, even without the "foundation" and "macroeconomics". And technical analysis is a type of analysis that visualizes the behavior of markets. It does not play "ahead of the curve". It only shows what changes have already taken place. Therefore, when there is no "foundation", you need to pay special attention to the "technique".
Almost the only significant event of the week will take place tomorrow. This event is the ECB meeting, from which almost no one in the market expects anything special and interesting. None of the market participants doubts that the rates will remain unchanged, as representatives of the ECB did not give any signals for such expectations. Most likely, the general rhetoric of the ECB leadership will not change either. As long as inflation does not approach a steady 2+% in the medium term, there can be no talk of tightening monetary policy. As for the further easing of monetary pressure, changes are not expected. Rates are unlikely to be lowered any further. Recall that the ECB deposit rate is already equal to -0.5%, which negatively affects the income of banks and everyone who wants to place a deposit. The same goes for the PEPP program, an emergency asset purchase program designed to mitigate the negative impact of the pandemic and the resulting crisis. Its volume is 1.85 trillion euros, and the terms suggest a monthly repurchase of assets until the end of March 2022. However, even now, many experts say that the volume will expand if necessary, and the duration of the program will be extended. As for the leading macroeconomic indicators, the unemployment rate in the EU remains quite high and may continue to grow in the next 12 months. Economic growth remains weak: at the end of the 4th quarter of 2020, a decrease of 0.7% q/q was recorded. In the 1st quarter of 2021, a decrease of 1.2% q/q is expected. Only in the second quarter of 2021 is growth expected, but it will depend entirely on the strength of the third "wave" of the pandemic, which has already begun in some EU countries, and its consequences for the economy. In general, most likely, the press conference with Christine Lagarde will cause the greatest interest among traders and not the results of the ECB meeting. And what can the head of the ECB tell us? Her recent speeches have made it clear that she has a low opinion at this time of the bloc's economy and the pace of its recovery. Therefore, it is unlikely that it should be expected to make optimistic statements. Consequently, the European currency is unlikely to receive support from the ECB. However, it does not need it because now other factors affect the exchange rate of the euro/dollar pair.
The volatility of the euro/dollar currency pair as of April 22 is 58 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1971 and 1.2087. The reversal of the Heiken Ashi indicator back to the top will signal the resumption of the upward movement.
Nearest support levels:
S1 – 1.2024
S2 – 1.1963
S3 – 1.1902
Nearest resistance levels:
R1 – 1.2085
R2 – 1.2146
R3 – 1.2207
Trading recommendations:
The EUR/USD pair maintains an upward trend but is correcting at this time. Thus, today it is recommended to open new long positions with targets of 1.2084 and 1.2146 if the Heiken Ashi indicator turns up or the price bounces off the moving average. It is recommended to consider sell orders if the pair is fixed below the moving average line with targets of 1.1902 and 1.1841.
