4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - downward.
CCI: -54.5939
The EUR/USD currency pair continues to move quite strangely. On the one hand, the downward trend that was formed a week ago remains. On the other hand, bears are now clearly weak for active sales, and bulls do not risk buying the euro at the current, fairly high positions. This results in a situation popularly referred to as "some people can't, others don't want to". Based on this, the prospects for the euro/dollar pair are currently vague and not clear. There is a high probability of starting a flat with the borders of 1.1350 and 1.1170. We have repeatedly said that from a fundamental point of view, there is no reason for growth in the euro currency. However, the euro has already risen in the past few weeks. Now there is a question about the fall of this currency, however, the general fundamental background from the US is also negative and makes traders doubt the feasibility of buying the US currency. Most of the macroeconomic statistics are still ignored, so the forecasting process is difficult. We just need to analyze the existing fundamental background and the planned macroeconomic reports for the next week.
From our point of view, the general fundamental background is now reduced to news about new aid packages for the American and European economies. We have already written that both packages are stuck in government offices and have not yet been accepted. Meanwhile, the economy needs a cash injection. This does not mean that without this money, the economy will collapse, however, it will be much harder and longer to recover. Plus, you should understand that behind the concept of "economy" are ordinary people who lose their jobs, lose income, lose their business, suffer losses. Thus, the main problem is not the fall of the economy itself, but how much the crisis will affect people. And of course, it is very interesting how the next confrontation between China and the United States will end. Most experts and political analysts believe that Donald Trump will not escalate the conflict with Beijing. It is one thing to impose sanctions at the beginning of your presidential term and on the economic recovery, when everything is good in the country. Another thing is when the country is engulfed by an economic crisis, Trump himself is mercilessly criticized for losing the fight against the "coronavirus" epidemic, and a new trade conflict can finish off the American economy. And as we have already found out a little above, behind each "economy" there are ordinary people. And it is unlikely that these ordinary people will go to the polls at the beginning of November to cast their vote to the person who will help their country go deeper into an even more serious crisis. Therefore, we can conclude that there will be no escalation of the conflict with China in the coming months.
There will be quite a large number of important macroeconomic statistics in the new trading week, as well as several extremely important speeches by top US officials. On Monday, the US and EU news calendar contains only the German consumer price index for June, a preliminary value. Thus, we can consider this day absolutely empty in terms of statistics. On Tuesday, the European Union will publish inflation for June, also a preliminary value, and in the evening, Jerome Powell is scheduled to address the US Congress and US Treasury Secretary Steven Mnuchin. Of course, these two speeches can be filled with important information, in particular about the notorious package of economic stimulus, which is currently not able to agree on in Congress, Democrats and Republicans. On Wednesday, Germany will release important data on the unemployment rate and the change in the number of unemployed for June. Unemployment is expected to rise to 6.6%, which is still not high. More significant events are planned for the second part of the day: the publication of the minutes of the last meeting of the Fed monetary committee, the ISM business activity index in the manufacturing sector, and the ADP report on the level of employment in the private sector. Each of these three events is extremely important, but at the same time, they may not give the market the information that it will be impossible not to react to. For example, the forecast for the ADP report is 3.5 million. This is a huge figure, which in normal times would cause a serious strengthening of the US currency. However, in the current environment, these 3.5 million new workers do not mean anything, since about 20 million people in the US have lost their jobs in the past few months. The same applies to the ISM index, which can grow to a value of 49. However, 49 is in any case a low value, which indicates a reduction in the industry, not its growth. Thus, we can only be happy about the fact that the economy is beginning to recover, but if Jerome Powell does not expect a quick and full recovery, then we should hardly expect it either.
On Thursday, the European Union is scheduled to have an unemployment rate that could rise to 7.7%. And in the United States on this day, the next report on applications for unemployment benefits, Nonfarm Payrolls, production orders and changes in the average hourly wage will be released. On the last trading day of the week, only Markit's business activity indices for June are scheduled. In the European Union and Germany, the indices are likely to remain below 50.0, so the situation with business activity will not change dramatically.
What is the result? A busy working week, during which traders can get a fairly large amount of important information. Accordingly, the movement in the market can be strong. At the same time, we believe that most of the macroeconomic events can be ignored by traders again. There will be no reaction to it, so technical factors will remain in the first place of priority.
The average volatility of the euro/dollar currency pair as of June 29 is 82 points and is characterized as "average", but in general, the volatility continues to decrease. We expect the pair to move between the levels of 1.1135 and 1.1299 today. Turning the Heiken Ashi indicator up will signal a new round of upward movement, possibly within the side channel.
Nearest support levels:
S1 – 1.1108
S2 – 1.0986
S3 – 1.0864
Nearest resistance levels:
R1 – 1.1230
R2 – 1.1353
R3 – 1.1475
Trading recommendations:
The euro/dollar pair changed its direction again and settled below the moving average line. Thus, at this time, short positions with the goals of 1.1135 and 1.1108 are relevant, which it is recommended to keep open until the MACD indicator turns up. At the same time, there is a probability of a price rebound from the level of 1.1170 – the previous local minimum. It is recommended to return to buying the pair not before fixing the price above the moving target of 1.1299 and 1.1353.
