4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 113.3903
On Tuesday, the EUR/USD currency pair did what we talked about in recent articles. Namely, it continued its upward movement and exceeded the maximum of February 25. Thus, as we have repeatedly said, the upward trend continues, and now the euro/dollar pair has taken the course to the maximum of January 6 (1.2340), which is also the maximum for the last three years. We draw traders' attention to the fact that there were no important publications during yesterday. The European currency resumed its growth in the morning without even waiting for any news or reports. It suggests that market participants do not depend on "macroeconomics" or "fundamentals" at all. And even the movement of the pair now does not rely very much on traders. The US economy continues to receive hundreds of billions of dollars, inflating its money supply. Thus, the US dollar continues to become cheaper. It is not about macroeconomic statistics, the yield of 10-year treasuries, high inflation in the United States, the inaction of the Fed, and so on. It's just that the money supply is inflated, and the dollar rate is falling accordingly. Of course, monetary stimulus is also carried out in the European Union. In particular, the European Central Bank is also pouring in 80 billion euros a month under the PEPP program. However, 80 billion is less than 120 billion, and the Fed has repeatedly focused on the interpretation of "at least $ 120 billion per month".
The Federal Reserve can inject 200 billion a month into the economy. We have also repeatedly compared the indicators of the aggregates of the money supply of the UK, the EU, and the US. This analysis clearly showed that the money supply in the United States had grown at least 1.5-2 times over the past year (depending on the aggregate). In the European Union and Britain, it has increased by 15-25%. Thus, there is no doubt that the dollar is depreciating precisely because of this factor. Also, do not forget that budget incentive is actively used and monetary stimulus in the United States. The US government has already accepted at least three stimulus packages totaling more than $ 6 trillion and will accept two more in $ 4 trillion. This money is also not taken from reserve funds and is not borrowed on foreign markets. This money is borrowed from the Fed, which can print it as much as it wants since the central bank (Fed) in America is not subject to either the president or Congress. It is like a separate organ in itself. Thus, we once again draw traders' attention to the fact that now even the market participants themselves decide little in terms of the trend. The upward trend continues and will continue for a very long time until the Fed and the US Congress stop the monetary and budget madness. However, it is unnecessary to count on this since cash injections into the economy are almost the only opportunity to stimulate it. It does not allow China to approach it. After all, it is in the face of China that Washington sees the main threat to its economic hegemony in the world. Therefore, it must be restrained by all means. Hence the trade war with China, hence several sanctions and restrictions. And, in principle, Washington openly says that they see China as the primary opponent and will make every effort to contain it and not let it get close to them.
The rest of the fundamental background is just a background, in the truest sense of the word. It has almost no effect on the trend. Last week, the euro/dollar pair was first brought down by the publication of the Fed minutes, in which market participants were openly looking for at least some "hawkish" note and found it. On Friday, Christine Lagarde brought down the pair, who openly stated that there is no question of any tightening of monetary policy and curtailing the PEPP program now. Well, as "collapsed." In both cases, the European currency lost 50-60 points. Thus, all the talk at this time about the possible curtailment of the quantitative stimulus program in the US or the European Union, or the UK is just nonsense.
Until the end of 2021, no one will even think about it. The latest statement by the head of the Bank of England, Andrew Bailey, seemed to assume that the regulator could raise rates in 2022. However, the rate may be raised in January 2022 and maybe in December 2022. Both are 2022. However, the difference between these increases could be almost a year.
Moreover, even the Fed and its representatives with the highest rate of recovery of the American economy do not expect a rate hike earlier than 2023. In the United States, the economy in the first quarter of 2021 gained 6.4%, and in the second, it is expected to gain 12.9% (judging by forecasts). However, rates will increase in the UK, where the first quarter ended with a minus of 1.5%, and in the second quarter, growth is projected at "as much" 5.1%, which is not so much after the last two weak quarters. Thus, we do not believe that there will be changes in the incentive programs in Europe or the United States in the near future, and even more so in the key rates. And since there will be no fundamental changes in the next 7-8 months, there will also be no impact from this factor until the end of this year.
The volatility of the euro/dollar currency pair as of May 26 is 61 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2186 and 1.2308. A reversal of the Heiken Ashi indicator back down will signal a new round of corrective 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 continues its upward movement. Thus, today it is recommended to keep long positions open with targets of 1.2268 and 1.2308 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair is fixed below the moving average with the first target of 1.2146.
