4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 2.8309
The EUR/USD currency pair started moving upward after trying to overcome the moving average line yesterday. However, already in the US trading session on Tuesday, it again rushed down. As we said earlier, now is a very favorable time for the US dollar to continue strengthening. There are several factors in favor of this. First, technical. The euro currency has been growing for almost a month and during this time there was not a single significant correction, only small pullbacks. Therefore, the pair needs to adjust in any case. Secondly, it is fundamental. Despite the absolutely destructive state of America now, when the country was swept by 4 crises at once, the euro currency has risen in price over the past three months by 12 cents, which is a lot in any case, against any fundamental background. For example, during the collapse of the pair in mid-March, when the markets bought the dollar without paying attention to anything, only 8 cents were passed down. Thus, we believe that the euro currency is currently overbought and the market requires consolidation. All this leads us to the conclusion about the further movement of the pair's quotes down.
The fundamental background of Tuesday was almost absent. No important macroeconomic reports were published on this day in either the US or the EU. Thus, traders only had to track various "second-plan" news and analyze them. However, in the first place now in any case remains "technique". Therefore, while the euro/dollar is preparing for a new round of corrective movement, we suggest discussing important and significant topics for the US currency in the long term.
In our humble opinion, the future of America now depends on who wins the election on November 3. We have repeatedly said that the research of the last three months shows a clear advantage of Joe Biden over Donald Trump. The gap in political ratings is from 8% to 14%, which is a lot, given that the election is about 3 months away. However, experts say that everything can still change. In order to understand what can help Trump win the election, you need to understand what does not suit American voters in the activities of Trump as President. And here, unfortunately for the President, the list is quite extensive. The first and most important is "coronavirus". The epidemic has completely engulfed the United States, and the country is leading the world in terms of both the number of diseases and the number of deaths from the virus. Naturally, the American people blame the President and the current government for everything. And he blames it quite reasonably, because it is Trump who owns the phrase at the very beginning of the pandemic that "the virus will not cause significant harm to Americans". A little later, Trump said that "the virus will disappear miraculously in April or May". These words misled Americans and now the country has the highest rates of mortality and morbidity. As we can see now, in August, Trump's predictions did not come true, so it is clearly not worth it to participate in the show of psychics. The second thing that does not suit Americans is the economic situation of the country and unemployment. It is clear that the second point depends entirely on the first. And if there were no "coronavirus", there would not be 11% unemployment. According to the latest estimates, about 20 million people lost their jobs in the country. And all of them need to pay benefits to avoid mass riots on this ground as well. However, the government at the same time needs to revive the economy, and to do this, people need to return to work. To do this, the Republicans propose to lower the "coronavirus allowances" for unemployment benefits, and Americans immediately begin to criticize politicians, since not everyone wants to lead an active social life at a time when about 60-70 thousand people are infected every day in the country.
In general, for the three remaining months, Trump needs to urgently solve the problem of the collapse of the economy by 33% in the second quarter, urgently resuscitate it, as well as the problem of the epidemic. We believe that it will not be possible to restore the economy in three months. This is almost 100% and this has been repeatedly said, for example, by the head of the Federal Reserve, Jerome Powell. And he knows and understands exactly what the economic recovery after the largest collapse in the history of the country is like. Thus, Trump can only bet on one thing. For the coronavirus vaccine. And it seems that Trump has chosen this strategy in interaction with voters for the next three months. First, the American President resumed "coronavirus briefings". Second, Trump has begun to take the pandemic seriously. Third, with the slightest decrease in the number of cases, Trump declares that the epidemic is receding. Fourth, he continues to repeat that the death rate in the United States is one of the lowest in the world. Fifth, he regularly repeats, like a mantra, that the vaccine against "coronavirus" is in the final stage of development. Sixth, Trump removed from the limelight the country's chief epidemiologist, Anthony Fauci, who regularly gave interviews in which he refuted everything the president said, further undermining the credibility of his words. Now Trump "sees signs of improvement in the epidemiological situation" and believes that "the virus has begun to recede". And this is despite the fact that the number of infections continues to grow in at least 15 states, and in the rest there is a slight drop in the virus's contagiousness. Regarding the creation of a vaccine, Trump said the following: "We expect the vaccine to be available by the end of the year, well ahead of schedule. We are very close to completion." Many political scientists and experts believe that Trump can put pressure on the FDA to have a certain number of doses available before November 3, as well as on the Department of Health and Human Services to speed up the process of developing a drug against COVID-2019. If Trump really gets the vaccine before November 3, then he will have the strongest trump card, since the president will clearly attribute the success of doctors to himself, saying that it was because he paid due attention to the "coronavirus" that American companies and scientists developed the drug. And the US dollar will definitely get the support of traders, since this will mean a potential victory over the epidemic and the key to this victory will be in the hands of America. However, we should not forget that 157 vaccines are currently being developed in the world, so not only the United States can become the owners of the vaccine.
The volatility of the euro/dollar currency pair as of August 5 is 100 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.1681 and 1.1881. The upward turn of the Heiken Ashi indicator will signal the end of the downward correction within the framework of the still continuing upward trend.
Nearest support levels:
S1 – 1.1719
S2 – 1.1597
S3 – 1.1475
Nearest resistance levels:
R1 – 1.1841
R2 – 1.1963
Trading recommendations:
The EUR/USD pair continues to adjust to the moving average. Thus, at this time, it is recommended to continue to consider the possibility of opening purchases with the goals of 1.1841 and 1.1881, but to do this, you need to wait for the Heiken Ashi indicator to turn upward. It is recommended to open sell orders no earlier than when the pair is fixed below the moving average line with the first target of 1.1597.
