4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 73.0524
On Tuesday, June 1, the EUR/USD currency pair again traded very calmly. Recall that on Monday, the pair's volatility was about 50 points, but then there was at least some explanation: there were no macroeconomic statistics and other events on this day. But on Tuesday, there were statistics. However, this did not help traders to trade more actively. At the time of publication of all statistics in the euro area, including important reports, the pair's volatility was 29 points. It would have been about the same on Monday, but then in the US trading session, the pair still "woke up" and passed an additional 25 points up. Thus, we once again draw traders' attention to the fact that there is no particular reaction even to relatively important reports at this time. This weekend, we said that out of all the scattering of macroeconomic reports and fundamental events of this week, at least a couple of traders reacted. In practice, this is what happens. On Tuesday, on a fairly strong report on inflation in the Eurozone, quotes passed about 25 points in an hour. Although the European currency is traditionally a low-volatility currency, 50 points per day are minimal. In principle, the volatility illustration below shows how much this indicator has sunk recently. We continue to draw traders' attention to the most critical factors that matter now for the euro/dollar pair. It is important to understand the whole picture of things not to rush and panic and not get losses.
First, global fundamentals remain on the side of the European currency. Even if this currency does not show growth every day, this does not mean that the US dollar has a chance of serious strengthening. We have repeatedly said that the main factor in the rise in the price of the euro currency in the last 15 months is a strong increase in the money supply in the United States, thanks to large stimulus packages and the Fed's actions. Given the fact that the Fed is not going to curtail the quantitative stimulus program yet, and the US Congress will now try to adopt a budget for the 2022 fiscal year, which implies an increase in spending to $ 6 trillion, it is hardly worth talking about the possible end of the printing press in the US. Most likely, the money supply will continue to inflate further, and the fall of the US currency will come with it. It should also be recalled that the United States benefits from a "cheap" dollar, and the European Union does not benefit from an expensive euro.
Secondly, the state of the economy of the United States or the European Union, and, consequently, all macroeconomic indicators and reports are not particularly important now. Macroeconomic data can only have a minimal impact on a particular intraday currency. No more than that. At this time, the US economy feels much better than the European one, so it would be more logical to observe the growth of the US dollar and not the euro currency. But since increasing the dollar supply in the United States is much stronger, macroeconomic factors are simply in the shadow. We can't even say that they are not taken into account by the market. Because now it's not even these same market participants who "rule the ball." Central banks and governments are now running the show, feeding their economies with liquidity as part of various stimulus programs.
Simply put, they print money and pour it into the economy through multiple mechanisms. In the European Union, they do the same thing as in the United States. For example, for the PEPP program. The only difference is that they pour 2 trillion euros into the economy in the European Union and abroad – 4. In the European Union, they adopt a budget of 2 trillion euros, and in the United States – 6. Thus, the factor of the state of the economy of the EU and the US is not particularly important now.
Third, we have already said that the euro/dollar pair could change the global trend to an upward one in 2017. In 2017, the European currency reached a minimum point in a pair with the US dollar around the level of 1.03, thus reaching almost parity. However, if you look at the movements in the years following that moment, the European currency has not reached the very top point of these 4.5 years. And the whole new global upward trend can take from 6 to 12 years. At least another couple of years, the euro has to show strengthening in a pair with the US currency. Therefore, we are waiting for at least an update of 3-year highs and then 6-year highs.
Fourth, there are no prerequisites for changing at least one of the global factors listed above. Money in the United States continues to be printed and poured into the economy, amounting to trillions. Washington does not want China to approach it in economic terms, so it will do everything to ensure that the economy continues to accelerate. And inflation, the national debt, and the depreciation of the US currency – this is the second question. The global technical trend is unlikely to end with the total growth of the euro currency by only 2,200 points. It is minimal for global trends. And macroeconomic factors now really play a minimal role in determining the movement of the pair.
The volatility of the euro/dollar currency pair as of June 2 is 57 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2173 and 1.2287. A reversal of the Heiken Ashi indicator back down will signal a possible new round of downward movement.
Nearest support levels:
S1 – 1.2207
S2 – 1.2146
S3 – 1.2085
Nearest resistance levels:
R1 – 1.2268
R2 – 1.2329
Trading recommendations:
The EUR/USD pair has started a new upward movement. Thus, today it is recommended to stay in long positions with targets of 1.2268 and 1.2287 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair remains below the moving average with targets of 1.2146 and 1.2085. We also remind you that the pair is now moving almost flat.
