4-hour timeframe
Technical details:
Higher linear regression channel: direction - sideways.
Lower linear regression channel: direction - sideways.
Moving average (20; smoothed) - down.
CSI: -103.6868
The EUR/USD currency pair starts below the moving average line on Tuesday, May 5. Thus, the trend for the pair has changed to a downward one, and the downward movement continues according to our assumptions about consolidation in a wide side channel. The first two trading days of the week were quite active, although important statistics were not published on these days. Nevertheless, 180 points were passed, which is not so small for the euro. However, we still have no reason to assume that traders have begun to form a new downward trend.
Although traders do not sit on the fence, and the flat in the literal sense of the word is not observed for the EUR/USD pair, the fundamental background remains extremely weak. For example, in the first two trading days of the week, only the indices of business activity in the production and services sectors of the European Union, as well as in the US services sector, were published. It makes no sense to stop at these indices since they simultaneously fell. Moreover, now it does not matter whether the hypothetical index of business activity in the United States will be reduced to 30 points or 20. It doesn't matter. The service sector is experiencing huge problems due to the quarantine, the production sector is kept afloat, but it is also declining. Thus, before the end of the quarantine, it is premature to talk about any restoration of these indices, and, more importantly, about the restoration of the production and services sectors themselves. Therefore, everything, as we have said before, comes down to the quarantine and the epidemic. EU countries and the United States are beginning to gradually relax the quarantine measures under the friendly calls of doctors to do it slowly and as carefully as possible. Otherwise, all the hastiest countries risk a second wave of the epidemic. We can only observe what is happening and monitor the daily incoming messages from the US White House.
And all the messages from the White House now relate to one topic. The United States is serious about igniting a new conflict with China. And not without reason, since it does not matter whether the virus accidentally broke free or on purpose. It was developed, studied, and escaped from a special laboratory. Accordingly, Beijing should bear responsibility for the consequences. This opinion is held not only by Donald Trump and Washington officials. Emmanuel Macron and Michael Gove also believe so. Thus, from our point of view, China may soon fall out of favor with many developed countries of the world. However, this topic is quite "subtle". For example, the United States has declared "a huge amount of evidence of China's guilt", but none has been presented to the world public for discussion. They may be unpublished. For example, Washington found out what happened in Wuhan through outright espionage, but if it reveals its cards, it will immediately be accused of illegal activities on foreign territory. Therefore, many points may be clear and obvious to Washington, but they cannot bring them to the general court. Therefore, China can not be accused of anything yet, since there is no evidence. Beijing understands this and calls on the United States to release information with evidence if they have it. However, the main complaint against China is not even that the virus broke free, but that the Chinese authorities misinformed WHO and the whole world, and also delayed the publication of information about the fact that the virus broke free and about the degree of its contagion. US Secretary of State Mike Pompeo said that the Chinese authorities did everything possible to prevent the world from learning about the COVID-2019 threat in time. Thus, if Beijing had declared everything from the very beginning, it would have been possible to prepare for the epidemic more seriously. However, the Chinese authorities did the same as the Soviet authorities did in 1986 when the accident at the Chernobyl nuclear power plant occurred. For several days, until the huge radioactive cloud over Europe could no longer be hidden or ignored, the Soviet authorities denied that any accident had occurred on the territory of the country. Residents of Pripyat and nearby cities and towns began to be evacuated only on the third day. Thus, something similar was done by China, which knew from the very beginning that the virus was transmitted from person to person, but hid it. Perhaps the Chinese authorities wanted to localize the epidemic and not "take the trash out of the house". Perhaps when they realized that the virus had broken free, they felt that it wasn't just their economy that should suffer. Perhaps even the virus leak was not accidental. However, we can't say for sure about this. Thus, there will be a lot of claims and accusations against China, most of which will remain without evidence.
On the third trading day of the week in the European Union, the publication of business activity indices in services is planned. All indices will remain below the mark of 20. As we said above, it doesn't matter how much the values of these indicators will fall. Thus, these figures will be ignored by market participants. A little later, a report on retail sales in the European Union for March will be published. It is expected that volumes will decrease by 10.5% in annual terms, and by 8% in monthly terms. However, this will also not be a revelation for traders. Almost everyone is ready for such a decline now. In the afternoon, the ADP report on changes in the number of employees in the private sector will be released in the United States. This report is considered quite important, but in April it may show -20 million workers. Despite such huge losses, traders are ready for this, since these figures have long been no secret to anyone. Weekly reports on applications for unemployment benefits display them for several weeks in a row. So this is not some "new" 20 million. Therefore, the markets are unlikely to react to these data either.
Thus, we still have the same technical factors that will continue to influence the movement of the currency pair. We have already assumed that the euro/dollar pair is now consolidating in the 250-point range. So far, this scenario is being worked out at 100%. Having pushed off from the upper border of the channel, the Murray level of "2/8", the quotes are moving confidently to the lower border of the channel - just above the Murray level of "0/8". Thus, we expect a fall now in the area of 1.0750-1.0800. This is likely to be followed by a rebound and a round of upward movement.
The volatility of the euro/dollar currency pair as of May 6 is 95 points. Thus, the indicator has started to grow again and at the moment falls under the "strong" characteristic. Today, we expect quotes to move between the levels of 1.0745 and 1.0935. A reversal of the Heiken Ashi indicator upward may signal a round of upward correction.
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 continues to move down. Thus, traders are now recommended to sell the euro currency with the goal of the Murray level of "0/8"-1.0742 before the Heiken Ashi indicator turns up. It is recommended to consider buying the euro/dollar pair, not before the price is re-anchored above the moving average line with the goals of 1.0935 and 1.0986.
Explanation of the illustrations:
The highest linear regression channel is the blue unidirectional lines.
The lowest linear regression channel is the purple unidirectional lines.
CCI - blue line in the indicator window.
Moving average (20; smoothed) - blue line on the price chart.
Murray levels - multi-colored horizontal stripes.
Heiken Ashi is an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
