4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - sideways.
Moving average (20; smoothed) - sideways.
CSI: -39.1184
On Thursday, May 14, the EUR/USD currency pair starts with the resumption of a downward movement within the side channel. However, the pair's movements in recent days no longer resemble movements between the borders of the channel with a width of 250 points, but "swings" in the range of 120 points. Thus, the pair is getting closer to an outright flat. Yesterday, for example, the fall in quotes was triggered by the speech of Jerome Powell, who assured the markets that he is not going to lower the Fed's key rate even more, as Donald Trump wants. Let's see what happens today. In any case, traders should take into account the possible flat channel of 1.0777-1.0897 in the medium term.
Over the past few years, we have been writing regularly about a British epic called "Brexit". Now two similar epics are brewing in the United States. The first is a new trade war with China, a conflict on the basis of the "coronavirus" epidemic, the second is the exit from the so-called "lockdown". The situation in the second epic is as follows. Donald Trump is in favor of restarting the economy as quickly as possible. However, it cannot "open" each individual state, it does not have such powers. The powers are vested in state governors, some of whom are Democrats and some of whom are Republicans. It is obvious that the Republicans are ready to go to a meeting with Trump or are simply afraid of his anger since they are members of the same political party. But the Democrats are not afraid to openly go against Trump, but in the case of the completion of the "lockdown", no Governor can be accused of deliberately not wanting to open his state to "annoy" the President. Recall that the country's chief epidemiologist Anthony Fauci, who in recent weeks regularly denied the statements of the US President, believes that it is not necessary to rush to complete or weaken the quarantine. Many representatives of the healthcare sector are in solidarity with him, who, unlike Trump and all his followers, hospitalize people with COVID-2019 every day and regularly see deaths from this disease, for which there is no vaccine. And although the percentage of deaths from "coronavirus" is not high, nevertheless, 83,000 deaths have already been recorded in the United States, the most in the world. Anthony Fauci believes that "the epidemic in the US is not under control". In addition, the chief epidemiologist of the United States said that children do not have any immunity to the disease, and a new wave of diseases is possible in the fall. Fauci also said that the premature opening of the economy with jumping through entire phases of a gradual exit from quarantine may cause a new danger that can not be controlled. "The main message I want to convey is the danger of premature opening of the country. If we jump over the key points of the recommendations, we run the risk of multiple outbreaks across the country. This will not only lead to new diseases and deaths but also set us back on the path to restoring the usual rhythm of life," Fauci concluded.
However, President Trump does not seem to listen at all to representatives of the health care sector and is obsessed with the idea of restoring the economy to work as quickly as possible. In this, almost the only way to win the election in November 2020 is to revive the economy as quickly as possible. To achieve this goal, Trump is ready to quarrel with anyone, including state governors. For example, most recently, billionaire Elon Musk voluntarily resumed work at Tesla factories in Alameda County, California, despite a ban by federal authorities. Before breaking the law, Elon Musk had a conversation with Donald Trump, during which the American President, of course, approved of such a decision by Musk. However, in this case, the approval of Trump does not mean anything, because, as we have already said, it is not Trump who decides when to end the quarantine in a particular state. As a result, all this turns into a conflict between Elon Musk and the authorities of the city of Alameda, which can smoothly turn into a trial. Trump himself publicly supported Elon Musk, writing on Twitter: "California should allow Tesla and Elon Musk to open factories immediately. This can be done quickly and safely!"
At the same time, as the American economy continues to collapse, Donald Trump wants to use all available means to maintain it. And one of these ways is to put new pressure on the Fed and Jerome Powell. If earlier Trump wanted rates to be close or equal to zero, now he believes that Powell should lower rates to the negative zone. "While other countries benefit from negative interest rates, the US should also accept this "gift"," Trump wrote on Twitter.
Well, so far we only see that Trump is ready to sacrifice tens of thousands of American citizens, ready even to sacrifice the economy itself. Because he doesn't have much time until November. Donald Trump is going all in. Either in the coming months it will be possible to restart the economy, despite the "coronavirus" or even if the economy finally collapses due to a new outbreak of the epidemic, it will not be worse for Trump. Joe Biden can only wait. Wait and watch for Trump's desperate attempts to increase his political ratings. Almost every action of the US leader can now be absolutely calm and reasonably criticized. For example, Trump's desire to hold campaign rallies in the United States during the quarantine.
What all this means for the US dollar. At the moment, only that in the future, the markets may begin to get rid of the US currency due to the short-sightedness of the actions and decisions of the American leader. However, the dollar exchange rate does not depend only on Ameria. In Europe, we will remind you that a stronger economic downturn is expected. Moreover, in Europe, a conflict is brewing between the European authorities and Germany, which may end with the courts and the exit of the rebel country from the Alliance. In addition, Italy, Spain and other countries most affected by the pandemic require urgent assistance from the EU authorities, which, in fact, is blocked by Germany, which is desperate not to pay for other people's mistakes. Many experts believe that as a result of the "coronavirus" crisis, the European Union may collapse.
The average volatility of the euro/dollar currency pair as of May 14 is 75 points. Thus, the indicator remains stable, and its value is now characterized as "average". Today, we expect quotes to move between the levels of 1.0746 and 1.0892. The upward turn of the Heiken Ashi indicator may signal a new round of upward movement within the channel of 1.0750-1.1000 but within the channel of 1.0777-1.0897.
Nearest support levels:
S1 – 1.0803
S2 – 1.0742
S3 – 1.0681
Nearest resistance levels:
R1 – 1.0864
R2 – 1.0925
R3 – 1.0986
Trading recommendations:
The EUR/USD pair is fixed back below the moving average, so at the moment, formally, short positions are again relevant. However, we are increasingly inclined to the fact that the pair is now in the flat, as indicated by the moving, directed sideways for several days. Thus, it is best to start trading down if the lower limits of both side channels (1.0777 and 1.0750) are overcome. It is also recommended to consider buying the euro/dollar pair after the quotes exit from the side channel, that is, above 1.0897 with the goal of 1.1000.
