On Tuesday, the currency pair EUR/USD showed the movements everyone is already used to. In recent weeks, we have repeatedly discussed that overcoming the moving average line means nothing. At normal times and under normal conditions, it only indicates a possible change in trend. But now, when the market refuses to buy the dollar, ignoring the fundamental and macroeconomic backgrounds, overcoming the moving average means a 100 percent resumption of the upward movement. This is what happened on Tuesday. After the price dropped below the moving average, many thought again that the long-overdue decline of the pair would finally begin. But once again, no! With ease and without a strong macroeconomic background or any fundamental background, the pair settled back above the moving average and now has technical grounds for continuing to move north. The situation remains quite strange, and the pair's movement is unjustified. We fully admit that traders may now face more "swings." The situation is such that after a 450-point rise, it is very difficult to continue buying if there are no reasons for this. Last Friday, another package of macroeconomic statistics was released in the United States that showed what we have known for a long time: the American economy is doing fine. Unlike the European one, yesterday's retail sales report showed a decrease of 0.8% m/m. However, this reduction did not affect traders' desires to buy euros during the day, and the growth of the European currency began at night.
On the 24-hour TF, the pair is still located near the 50.0% Fibonacci level, which can be considered an important corrective level, or the upper boundary of the sideways channel. Either way, the pair cannot overcome or bounce off this level. We still believe that the European currency has no basis for growth, but we remind you that the market can still buy the pair without any basis. Such periods do not happen often, but they still happen. And now is one of them.
The euro may still fall to 1.0530.
There is little to talk about after Tuesday's results. From Friday to Monday, there were Easter holidays according to the Catholic calendar, and there was almost no news. And the data that still came to traders were again processed illogically. Talking again about rates or a stronger state of the US economy seems not desirable. Everything has already been said on this topic. Traders either interpret macroeconomic statistics very strangely or one-sidedly. We believe that in the current circumstances, it is best to rely on the highest TFs (i.e., the 24-hour) or trade on the youngest ones, where you catch intraday trends. On the 24-hour TF, we should proceed from the level of 1.0938. Consolidation sits above it; we can expect further baseless growth. A rebound from it – a logical decline of the pair. But at the same time, consolidation above 1.0938 will not mean the upward trend will continue. The euro is already overbought and cannot even be corrected downward properly. And a rebound from the level of 1.0938 – will not mean a 100% drop, at least to the level of 1.0530, because the market refuses to buy the dollar now. The situation remains ambiguous and complex.
The average volatility of the euro/dollar currency pair for the last five trading days as of April 12 is 68 points and is characterized as "average." Thus, we expect the pair to move between 1.0844 and 1.0980 on Wednesday. The reversal of the Heiken Ashi indicator back down will indicate a new round of downward movement.
Nearest support levels:
S1 – 1.0864
S2 – 1.0803
S3 – 1.0742
Nearest resistance levels:
R1 – 1.0925
R2 – 1.0986
R3 – 1.1047
Trading recommendations:
The EUR/USD pair has consolidated back above the moving average line. You can stay in long positions with targets of 1.0980 and 1.0986 until the Heiken Ashi indicator turns downward. Short positions can be opened after the price consolidates below the moving average, with targets of 1.0844 and 1.0803.
Explanations for the illustrations:
Linear regression channels - help to determine the current trend. If both are directed in one direction, the trend is strong now.
The moving average line (settings 20.0, smoothed) - determines the short-term tendency and direction in which trading should be conducted now.
Murrey levels - target levels for movements and corrections.
Volatility levels (red lines) - the probable price channel in which the pair will spend the next day, based on the current volatility indicators.
CCI indicator - its entry into the oversold area (below -250) or overbought area (above +250) means that a trend reversal is approaching in the opposite direction.
