4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - upward.
CCI: 49.1665
The second trading day for the EUR/USD pair in more than prosaic trading. The pair worked out the Murray level of "5/8"-1.1353 for the third time, bounced off it for the third time, and adjusted to the moving average line. Thus, it is possible that now the pair's quotes will go below the moving average and try to resume the downward trend, but in general, the euro/dollar pair remains within the side channel, where it has been for about a month. Thus, in technical terms, nothing changed on Tuesday, July 7. Buyers are still afraid of new long positions, as a small amount of positive information is received from the European Union. At the same time, it does not come from the US at all, so the dollar purchases are now in doubt. However, sooner or later, the quotes will leave the side channel, we can only wait.
On Tuesday, from the macroeconomic events, we can only note the publication of industrial production in Germany for May. This indicator was worse than experts' forecasts and amounted to -19.3% in annual terms and +7.8% in monthly terms. Thus, market participants expected a stronger recovery of the indicator and did not wait. Perhaps even the fall of the European currency in the first half of the day was triggered by this report, although it is difficult to believe since traders regularly ignore much more significant publications. Moreover, the pair was ready to fall due to technical reasons. However, the negative from the European Union continued to arrive. The European Commission published a summer economic forecast yesterday, in which it indicated that it expects a stronger economic downturn, despite the measures taken by the EU government and the ECB. "Our summer forecast shows, first of all, that the path to economic recovery is still paved with uncertainties," said European Commission member Paolo Gentiloni. According to new forecasts, the Eurozone's GDP will shrink by 8.7% in 2020 and grow by 6.1% in 2021. The European Commission explained that the quarantine measures were lifted and eased at a slower pace than expected in the spring, so the impact of the pandemic on economic activity was deeper, therefore the decline in 2020 will be stronger. Paolo Gentiloni also made five conclusions on the development of the EU economy for the next two years:
1) "The pandemic has hit the European economy harder than expected."
2) "Rapid and decisive policy measures have enabled and are preventing the collapse of European labor markets."
3) "The difference between EU states is increasing. The European states have been hit by the same pandemic, but the consequences are different in the member states."
4) "Inflation will remain relatively low in 2020."
5) "Uncertainties remain high, and the risks that weigh on this forecast are downward-oriented."
Thus, the statements of the European Commission are full of depressing conclusions, forecasts, and expectations. With such a fundamental background, it is difficult to expect the euro to strengthen. Gentiloni also touched on the topic of global economic recovery, saying: "The decline in global GDP in 2020 due to the epidemic will be greater than we expected in the spring, reaching 4%, and the recovery will begin in 2021 at the level of 5% of GDP." Also, Gentiloni said that the accuracy of the current forecasts of the European Commission leaves much to be desired, as there are a huge number of uncertainties and factors that can turn the picture upside down, which may again harm economic growth. Also, Gentiloni noted the high risks of "divorce" of the UK and the European Union without an agreement. According to the politician, the current forecast for 2021 is based on the fact that London and Brussels will sign a free trade agreement. Gentiloni also noted that the current crisis will lead to an increase in poverty, which will have to be fought for many years. In this regard, the member of the European Commission called on the EU countries to quickly accept the 750-billion package of assistance to the European economy, which will be discussed at the EU summit on July 17-18. Earlier, several EU summits have already touched on the issue of allocating 750 billion euros to the most affected EU member states, of which about 66% of the funds will be provided on a non-refundable basis. However, the "Northern countries", the so-called "stingy four", Austria, the Netherlands, Denmark, and Sweden, are opposed to granting distribution of money and are ready to agree only to the option of lending. Thus, even at the next summit, it is far from certain that any positive decision will be made. As we said earlier, the longer the European Council considers this recovery plan, the more the economy and individual countries (Spain and Italy) will sink as a result of the "coronavirus crisis". Thus, we need to rush to approve the sources and methods of distribution of the recovery fund.
In the United States, meanwhile, all attention is focused on the "coronavirus", which is breaking records every day. Although the White House remains completely calm, and Donald Trump even calls for opening all schools from the first of September, the epidemic continues to infect 40-60 thousand Americans every day, and the total number of recorded cases of the disease is already almost 3 million. However, Donald Trump continues to think only about the upcoming elections, has planned several more trips to American cities with campaign rallies, and did not miss the opportunity to "prick" the Democrats and personally Joe Biden, writing on Twitter: "Corrupt Joe Biden and the Democrats do not want to open schools in the fall for political reasons, not because of health. They think it will help them in November. Wrong, people will understand everything." Also, Donald Trump did not forget to "ride" and "false media", writing: "The death rate from the Chinese virus has decreased by 39% while our best testing program in the world continues to work. Why are fake media silent about the fact that mortality is declining? All because they are fake!"
On the third trading day of the week in the European Union and the United States, no important information is planned again. In the EU, only the ECB Vice-President Luis de Guindos, who rarely makes important and high-profile statements, will make a speech. And even more so, how else can the ECB Vice-President spoil the mood of euro buyers after yesterday's forecasts and conclusions of the European Commission and regular "ultra pessimistic" speeches by Christine Lagarde? Thus, today the euro/dollar pair can remain inside the side channel, limited by the levels of 1.1200-1.1353.
The volatility of the euro/dollar currency pair as of July 8 is 77 points and is characterized as "average". We expect the pair to move between the levels of 1.1205 and 1.1359 today. A new turn of the Heiken Ashi indicator upward will signal a new round of upward movement within the side channel.
Nearest support levels:
S1 – 1.1230
S2 – 1.1108
S3 – 1.0986
Nearest resistance levels:
R1 – 1.1353
R2 – 1.1475
R3 – 1.1597
Trading recommendations:
The EUR/USD pair continues to trade near the moving average line, inside the side channel. Thus, at this time, it is recommended to trade down if traders manage to overcome the level of 1.1200, which is the approximate lower limit of the channel, with the goal of 1.1108. It is recommended to open buy orders not earlier than the Murray level of "5/8"-1.1353 with a target of 1.1475.
