4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 14.5848
On Tuesday, June 8, the EUR/USD currency pair was trading ultra-calmly again. The illustration below shows that the pair regularly issues days with a volatility of 40-50 points. On Monday, the volatility was average, although no macroeconomic statistics were published on this day. There were a couple of reports on Tuesday. However, the volatility was even weaker. The most important thing is that with such volatility, the pair will continue to climb out of the range in which it has been for more than three weeks. Recall that this range is not a side channel. In this case, we could say that the market is flat. However, there is still a minimal downward slope, and in addition to it, it isn't easy to distinguish clear boundaries at the intended side channel. Thus, now the euro/dollar pair is trading unpredictable. The most exciting thing is that all this is happening not far from the February highs and also not far from the highs for the last three years. The pair has climbed high enough and cannot even start a downward correction from its current positions. The bears are extremely weak right now, and the willpower of the Fed, which continues to print hundreds of billions of dollars, is extremely strong. So, over the past three weeks, it's even difficult to highlight any changes. The pair is in a limited range. There were no important fundamental events. Perhaps the only thing that comes to mind is ADP and Nonfarm Payrolls reports at the end of last week. The first provided serious support to the dollar, and the second caused pressure on the US currency. But at the same time, the global factors that made the European currency so high remain the same. Nothing changes.
Moreover, the situation may worsen for the dollar in the coming months. After all, the US government will not abandon its idea of stimulating the economy with trillions of dollars. The Fed is not going to wind down the QE program yet. But the ECB may announce a reduction in the monthly volume of bond repurchases, which will reduce the amount of money coming into the economy.
One of the key events of this week for the euro/dollar pair will be the ECB meeting. And to be more precise, this is one of two events that should be paid attention to. The ECB meeting is always interesting because its head, Christine Lagarde, likes to speak directly and frankly. If the economy begins to recover, then the head of the ECB says exactly this. She does not give empty hopes to the markets about a possible soon tightening of monetary policy, rate increases, and other things. There is a program of emergency assistance to the economy PEPP, which is calculated until March 2022, so it will operate until the end of March 2022. Then a decision will be made whether to extend it or not. Therefore, there is less hysteria in the market about the possible actions of the ECB now. By and large, the ECB meeting this Thursday will be designed to answer only two questions. 1) Will the volume of bond repurchases from the open market be reduced? 2) Whether the forecasts for inflation and GDP for the coming years will be raised. At the same time, the answer to the second question is a simple formality. Any forecasts from the central bank are a mere formality. Thus, the key question is whether the rate of bond repurchases under the stimulus program will be reduced. If so, it would mean that the European economy is in trouble but is accelerating and requires fewer liquidity injections. It will be a bullish factor for the euro/dollar pair. Recall that the European economy closed the fourth and first quarter with a minus, so the recovery began only in the second quarter. Therefore, to speak at the moment about any serious growth of the EU economy is not necessary. Moreover, if Jerome Powell noted that the US economy could reach a pre-pandemic economic growth trajectory as early as 2022, then Christine Lagarde and the IMF talked about the middle or end of 2023. Simply put, the pace of recovery to pre-crisis levels of the European economy is very far behind the US. This summer, the 750 billion euro recovery fund will finally begin to be distributed. And this money can help the European economy to accelerate a little. However, so far, it continues to grow very slowly. Therefore, we believe that the ECB will not announce or even hint at any easing of the stimulus measures. Thus, the meeting promises to be "passing." Of course, Christine Lagarde can shock the markets by saying something gloomy about the economy. Such a scenario cannot be excluded. In any case, the reaction to this event will most likely be local. Since Thursday's summing up is known for sure, traders can prepare for it so as not to take unnecessary risks and not guess what Lagarde may report.
Well, for the euro, the question now is as follows: when will the unintelligible movement in a limited range stop? The euro had fewer problems with growth against the dollar than it is now with the exit from a limited range. The US inflation report and the ECB meeting may help traders pull the pair out of this range. We do not see any other events this week that may contribute to solving this problem.
The volatility of the euro/dollar currency pair as of June 9 is 67 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2111 and 1.2245. A reversal of the Heiken Ashi indicator back down will signal a new round of downward movement.
Nearest support levels:
S1 – 1.2146
S2 – 1.2085
S3 – 1.2024
Nearest resistance levels:
R1 – 1.2207
R2 – 1.2268
R3 – 1.2329
Trading recommendations:
The EUR/USD pair has started a new round of upward movement. Thus, today it is recommended to open new short positions with a target of 1.2111 if the Heiken Ashi indicator turns down. It is recommended to consider buy orders not earlier than fixing the price above the moving average line with a target of 1.2245. The pair continues to be in a flat, which should be considered when opening any positions. We also give recommendations for trading on lower timeframes.
