4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 41.1885
The EUR/USD currency pair resumed its upward movement on Friday, May 14. At the same time, it may seem that the reason for the new growth was the macroeconomic statistics. However, this is not the case. There was one important report on retail sales in the States on Friday. It was disappointing, but the fall of the US currency began much earlier than its publication. Thus, if the US statistics had any impact on the pair's movement, it was small. In the European Union, nothing was interesting at all. Thus, from our perspective, the resumption of the upward movement has occurred mainly based on technical factors fueled by the global fundamentals. Recall that technical factors have long predicted the growth of the euro/dollar pair. First, we all know that everything in this world is cyclical. Roughly speaking, no currency can constantly fall unless we mean a third-world country or a country where the government explicitly does everything possible to prevent the national currency from strengthening. The European Union and the United States have comparable economies, and currency manipulation is extremely rare. Thus, their currencies are quite comparable. The last downward trend began in 2008 when the dollar started its growth to $ 1.03. Over the next nine years, the dollar against the euro rose by 57 cents. In 2017, a new upward trend (global) was expected to have begun. Thus, it can already be assumed that it will continue since it is not yet four years old. Usually, global trends take from 8 to 12 years. Based on this logic, we can assume that the pair will go up 30-40 cents. Otherwise, it will not be a trend but a correction. Therefore, we can already expect growth to the level of $ 1.42 - $ 1.43. Secondly, after the trend of 2020, a downward correction began, which took three months, and now the pair is moving up again and has already approached its 2.5-year highs. Therefore, again, we can assume that the long-term trend, which began in 2020, also continues.
Consequently, we can expect at least another 5-6 cents of growth (500-600 points) this year. In addition, the "global fundamental factor," which we have already talked about a million times and will continue to talk about until it ceases to have an impact on the US dollar. The Fed and the US government continue to pump money into their economy, which is the reason for its strong growth in recent months. However, the reverse side of the coin is inflation and the depreciation of the national currency within the country and world markets. It is beneficial for the states that the dollar is cheap. Donald Trump mentioned it. Thus, the Fed will do nothing to stop the fall of the dollar. And what can it do if it is currently pumping money into the economy itself? Thus, as long as the Fed continues to print dollars, the US dollar will continue to fall with a high probability. Of course, here you should understand the difference.
The Fed turned on the printing press back in 2008. If we take a relatively crisis-free time, then on average, the Fed bought securities for $ 20 billion a month. The US government did not introduce any incentive programs at that time. Thus, the maximum investment in the economy was $ 20 billion. Further, the last few years before the crisis of 2020, the Fed sold off the securities that were on its balance sheet, in other words, withdrawing excess liquidity from the economy. But then the "coronavirus crisis" broke out, and now only the Fed buys securities for "at least $ 120 billion" every month. In addition, the US Congress has already approved at least three stimulus packages totaling more than $ 6 trillion. Naturally, these 6 trillion also did not get out of the reserve fund. They were printed and sent to the economy. Therefore, at this time, we are talking about hundreds of billions of dollars that are poured into the economy every month. Naturally, with such monetary and fiscal incentives, the economy will grow, and the dollar will fall. And as long as this process continues, the dollar will fall because it simply cannot be otherwise.
There is only one caveat at this point. If, for example, tomorrow the European Union starts to print money in trillions in the same way, then the euro currency may become more expensive. The European Union can announce such a decision, or it can make covert interventions. It is possible that at this time, it is already doing this to stop somehow the growth of the euro exchange rate, which is not beneficial to the European Union. If, in the future, the EU will pour trillions of currency into the economy, then the euro may begin to fall. But, since the European Union is not the United States, it is still 27 countries, each of which must approve such an initiative. Such a scenario is unlikely.
Moreover, Europe has not started forming an economic recovery fund for 750 billion euros for a whole year because each country must ratify this agreement. All this takes a very long time because, within each country, many political forces and parties must approve new legislation. Their interests should be taken into account. Otherwise, there will be nothing at all. Recall that according to the EU charter, all countries must support such a global solution. If at least one is against it – then the decision is not made. Therefore, we do not have to wait for such actions from the EU yet. Consequently, in monetary terms, the balance of power between the dollar and the euro is unlikely to change in the near future. And "macroeconomics" and "foundation" currently have very little influence.
The volatility of the euro/dollar currency pair as of May 17 is 32 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2081 and 1.2205. A reversal of the Heiken Ashi indicator downwards signals a possible new round of corrective movement.
Nearest support levels:
S1 – 1.2085
S2 – 1.2024
S3 – 1.1963
Nearest resistance levels:
R1 – 1.2146
R2 – 1.2207
R3 – 1.2268
Trading recommendations:
The EUR/USD pair has consolidated back above the moving average and is currently in an upward movement. Thus, today it is recommended to stay in long positions with a target of 1.2206 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair is fixed below the moving average line with a target of 1.2024.
