4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -15.4243
On Tuesday, June 22, the EUR/USD currency pair was trading very calmly, and the volatility decreased to the levels of the beginning of last week. Markets have already calmed down about the Fed's policies and plans, which led to a 250-point drop in the European currency last week. On Monday, the pair slightly corrected up, and this movement stopped on Tuesday. Thus, at the moment, traders have the right to expect the continuation of the upward correction. However, it seems that it will occur with the usual volatility for the euro/dollar pair (that is, with a low one). However, further strengthening of the US currency looks even more unlikely. We have already said that the entire downward movement of the pair over the past few days seems quite illogical. The Fed meeting is a significant event. However, the markets rarely react to it for three days in a row. In addition, we remind you that no urgent and important decisions were made. In the approach and rhetoric of the Fed, only the forecasts for the economic recovery have changed (they change with each meeting).
Nevertheless, there are hints of a possible start to discuss the curtailment of the quantitative stimulus program, and the number of members of the monetary committee who supported a rate hike in 2022 has increased to 7. Here are all the results. Thus, from our point of view, the US dollar has risen unreasonably.
On the other hand, it had been falling for quite a long time before, and in some ways, it was heavily oversold. But there is also a third party that says all global factors continue to support the dollar's competitors. Thus, we believe that in the long term, the depreciation of the US currency will resume.
ECB President Christine Lagarde delivered a speech on Monday. The head of the European regulator again did not support the European currency, as she again spoke about the weakness of the European economy and the long way ahead for its recovery. Lagarde noted that the prospects for recovery have improved in recent months, and the risks associated with the pandemic are no longer having such a devastating impact on the economy. However, the European economy still needs to be stimulated. Thus, there is no question of an early end to the PEPP program in the near future, which should be valid until the end of March 2022. In addition, Lagarde noted the spread of new strains of "coronavirus," which continue to be sources of risk and uncertainty for all world countries.
It should be noted here that all known new strains are treated with existing vaccines. However, they are more contagious and dangerous. Moreover, not all countries of the world carry out vaccination at the same rate as developed countries. And since the economies of all countries of the world are tied together, new outbreaks in some countries can lead to a slowdown in the economic recovery in others. Also, Christine Lagarde asked not to compare the American and European economies, saying that they are completely different and are in different positions. Thus, the European Union is not going to follow the example of the Fed, where at the last meeting, there were some hints about the possible early end of the stimulus program. Naturally, this attitude of the head of the ECB did not support the euro in any way.
However, the rhetoric of Christine Lagarde does not change over time, and all ECB representatives agree with her. And here, nothing is surprising since the macroeconomic indicators of the European Union clearly show that the economy is only at the very beginning of the recovery path, which may take several years. However, let's be honest. All this was clear a few months ago when the euro currency was growing strongly against the dollar. Or it was near its 3-year highs. The US economy has long been showing a higher rate of recovery, which in no way helps the US dollar. Thus, we continue to insist that what is more important now is the cash injection into each economy, which is much higher in the States. Also, in the United States, GDP and inflation are growing at a higher rate. And inflation is the depreciation of money. So no matter how you look at it, it all comes down to the fact that the dollar is depreciating. Thus, we assume that the quotes of the euro/dollar pair may fall to the 17th level, where the previous local minimum is located. Maybe even a little lower. However, this downward movement will still fall under the definition of "correction," albeit in global terms. In addition, we should not forget that in global technical terms, the formation of a downward trend was completed in 2017, and the new upward trend is not yet so strong and long-term that we can talk about its completion. Therefore, we believe that in the long term, the fall of the US dollar will resume.
From a technical perspective of a local nature, the pair's quotes are located below the moving average line, so the trend is currently downward. However, nothing prevents traders from calmly restoring the pair to the moving average and then trying to overcome it. If this happens, the trend will change to an upward one, and the quotes will rush to their highs from May 25. A lot will depend on the US currency and on the budget in the US for the 2022 fiscal year, which implies spending at the level of $ 6 trillion. A specific part of this money is likely to be printed again since even with raising taxes in the United States and introducing a single corporate tax worldwide, it is unlikely that the States will have time to collect a couple of trillion dollars from these sources. A couple of extra trillions of dollars.
The volatility of the euro/dollar currency pair as of June 23 is 94 points and is characterized as "high." Thus, we expect the pair to move today between the levels of 1.1840 and 1.2028. A reversal of the Heiken Ashi indicator downwards will signal a new round of downward movement.
Nearest support levels:
S1 – 1.1902
S2 – 1.1841
S3 – 1.1780
Nearest resistance levels:
R1 – 1.1963
R2 – 1.2024
R3 – 1.2085
Trading recommendations:
The EUR/USD pair continues to adjust. Thus, today it is recommended to open new short positions with targets of 1.1902 and 1.1841 if the price bounces off the moving average line. It is now recommended to open buy orders no earlier than the price is fixed above the moving average line with a target of 1.2024.
