4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 33.5233
The euro/dollar currency pair spent in a not too strong corrective movement during the first trading day of the week. Since all the downward movement can be described as quite weak, the price could not even get far enough away from the moving average line. Therefore, the minimum correction and the pair are already moving. Based on this, a new price rebound from the moving average may trigger a resumption of the downward movement, according to the current trend. In general, the downward movement is much slower than the previous growth. Therefore, we can assume that sellers are not confident in their actions and doubt the feasibility of serious sales of the euro and purchases of the US dollar. Thus, the current fall in the currency best fits the description of the word "correction", which can end at any time. However, this will mean that the upward trend will resume, which has no fundamental support and banal logic under it. Recall that the main possible reasons for the sharp depreciation of the US currency in recent weeks were the following: mass riots and rallies in the US, the political crisis, the intensity of relations between China and the US due to the "Hong Kong" and "coronavirus" issues. These issues have not been resolved, however, at the same time, they cannot put pressure on the dollar permanently or for a long period. New information that can turn these topics in a different direction or give them development simply does not exist now. Thus, we do not see why the European currency can continue to grow now. However, in the currency market, you can never be 100% sure of anything. Thus, if traders manage to return to the area above the moving average line, then the upward trend will be resumed, and buy orders will become relevant again.
On the first trading day of the week, no important macroeconomic statistics were published either in the United States or in the European Union. Thus, traders had nothing to react to during the day. However, as long as Donald Trump remains President of the United States, there will be no shortage of interesting comments and high-profile statements. For example, the US President previously linked the high incidence of American "coronavirus" with a large number of tests conducted in the US. However, as official data showed, the United States was not even in the top five countries in the world in terms of the number of tests performed per 1000 residents. Yesterday the leader of the United States brought a shock to his listeners, fans, and supporters with a statement in the pre-election rally in Oklahoma. Trump said that "when testing is carried out on such a scale as in the US, it inevitably leads to a large number of recorded cases of the disease". So the US President "asked his people to slow down testing". To be honest, we do not know how to react to this statement of the American President. By and large, Trump wanted to say the following: "The high incidence of American disease is hindering my campaign and lowering my political ratings, so I decided to slow down testing so that things don't look as bad as they are." Several Trump officials and advisers immediately called the president's words a "joke", although this is very controversial. Trump regularly amuses the public with his contradictory statements, which are refuted even without referring to experts from the field that the US leader has touched on this time. By the way, at the same time, eight states in America announced a record number of cases of COVID-2019. The total number of cases in the United States today is almost 2.3 million, the number of "deaths" - almost 120 thousand. The "contagion" curve is directed upward at the same angle as before, which means the same rate of increase in the spread of infection, no slowdown.
Meanwhile, the American President also came up with a new name for "coronavirus", calling it "kung flu" (flu – English. "flu"), thus referring to the Chinese martial art "kung fu". In general, in the last 6 months of the presidential term, Donald Trump seems to be having as much fun as he can.
On Tuesday, June 23, preliminary values of business activity indices in various services and manufacturing sectors will be published in the United States and the European Union. We already said in articles over the weekend that these reports are unlikely to cause any reaction from traders, since they are preliminary for June, which has not yet ended, and in any case, the values of these indicators will remain below the mark of 50.0. Therefore, no matter how much business activity increases, it will not be enough to declare the growth of the economy itself. Although it should be recognized that business activity in Germany is expected to be higher than 40.0 in both areas, just like in the European Union. Thus, in a few months, hypothetically, we can expect these indicators to return to the "growth zone". The situation in the United States is the same as in the European Union. Both Markit business activity indices are likely to be more than 40, and forecasts predict even values of 46.0 and 47.8, which is already "almost 50". Thus, it is American business activity that can be the first to return to the "growth zone", which will contribute to a faster transition to recovery than in the European Union. This factor may support the dollar in the medium term.
As for technical factors, the most important now is moving. As long as the pair remains below the moving average, the downward trend persists, which will eventually contribute to a downward reversal of both linear regression channels. However, for now, both channels are directed upwards, so we would say that the chances of resuming the upward trend are even greater. The problem is that the foundation and macroeconomics do not support the euro currency and we do not see how the euro can show new long-term growth.
The average volatility of the euro/dollar currency pair as of June 23 is 94 points. Thus, the value of the indicator is still characterized as "high", but in general, volatility is decreasing. We expect the pair to move between the levels of 1.1165 and 1.1353 today. The reversal of the Heiken Ashi indicator downwards signals a new round of downward movement, however, the price must remain below the moving average.
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 euro/dollar pair has started at least an upward correction. Thus, at this time, sell orders with targets of 1.1165 and 1.1108 remain relevant if the pair bounces off the moving average line. It is recommended to return to buying the pair not before fixing the price above the moving average with the first goals of 1.1353 and 1.1475.
