4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -155.6859
The EUR/USD currency pair starts a new trading day with a continuation of the downward movement. Yesterday, April 23, the euro/dollar pair adjusted to the moving average line, but, quite predictably, failed to gain a foothold above it. Thus, at the moment, the downward trend persists and is supported by two linear regression channels and a downward moving average line. Thus, at the moment, all trend indicators in the "linear regression channels" system signal a move to the south. Therefore, now we can conclude that the period of consolidation of the pair after several corrections against each other is over and may well begin to form a new downward trend. Questions about the current movement remain basically the same. And what are the reasons now for the US dollar to become more expensive? Is the situation in America better than in Europe? The epidemic has affected the United States less than the EU? The US is handling the epidemic better than the Alliance? The consequences for the American economy will be milder than for the European one? No. So, what is the basis for the dollar's growth? As before, on the sole belief of traders and investors that anything can happen in the world but the US dollar will be unshakable. Unfortunately, this is the most powerful factor right now. All macroeconomic statistics and fundamental news continue to be ignored by market participants.
Meanwhile, the European Union held a summit in a video format, where 27 EU member states had to decide the fate of a 2 trillion package of aid to the European economy and the countries most affected by the pandemic. Recall that the main proposal of the European Council is to start issuing bonds on behalf of the entire European Union, which are now called all "coronabonds". This idea is opposed by the "Northern" countries - Estonia, Finland, the Netherlands, Germany, and Austria. Today, German Chancellor Angela Merkel said that during the video conference, the issue of issuing "coronabonds" may be discussed, but she believes that Europe needs more flexible tools. "Some demand that, in the face of a severe crisis, we approve common debt obligations with shared responsibility. This issue will obviously be put on the agenda in a video conference of the European Council," Merkel said. "For a limited period, we must make significantly higher contributions to the European budget," Merkel also said, indicating that Germany is ready to pay the EU more than it is now, just to avoid participating in the issuance of common European bonds.
A little later, information began to arrive about the results of the summit. Here, too, there were few surprises. It is reported that the EU leaders failed to agree on the creation of a fund to help the European economy in the amount of 2 trillion euros. The parties did not agree on the sources of raising funds and the exact amount needed to restore the EU economy. It is also still unclear on what terms funds will be provided to the most affected countries. On the terms of preferential loans or gratuitous assistance? Recall that the countries that opposed the "coronabonds", just think that the poor countries had to accumulate more funds for the creation of "safety cushion" during good times. Thus, in general, the results are as follows. EU countries approve the creation of a fund for economic recovery from the coronavirus pandemic. But the sources of funding for this fund and its size will be discussed later. The European Commission is charged with developing and proposing a new budget and ways to finance it. This is very bad news for the EU and the euro currency. And we believe that today the European currency may continue to devalue against the dollar due to the failure in the negotiations. After all, it should be understood that this is not just an ordinary aid package, but an aid package that should save the European economy. Roughly speaking, the more the economy falls now, the longer it will take to recover. And 2 trillion euros will be used to soften its fall. Therefore, they are vital.
In Italy, by the way, they do not particularly believe that the EU government will provide effective assistance in the fight against the "coronavirus". Among the Italians polled, only 30% believe that the EU will provide assistance. According to the same poll, more than 42% of citizens support the idea of leaving the EU. Recall that Italy is now the headache of the entire European Union. It is Italy that has the largest public debt, exceeding EU norms by 2.5 times. It was Italy that suffered the most from the "coronavirus" and therefore requires the most help.
In addition to the news from the EU summit, there will be several macroeconomic publications today. The least interesting ones will come from the European Union. It is unlikely that in the current conditions, traders will be seriously interested in data on business optimism or economic expectations in Germany. Thus, the hopes of euro traders will only be associated with the report on orders for durable goods in the United States, which, according to experts' forecasts, promises to come out as disastrous as a business activity a day earlier. Recall that this indicator has three derivatives. The total number of orders is expected to decrease by 12% compared to February. The indicator of orders excluding transport – with a decrease of 6%. The indicator excluding defense orders – with a decrease of 8.6%. The indicator excluding defense and aviation – with a reduction of 6%. Over the past 10 years, only once did these indicators show a similar drop, in 2014. Thus, this report, which is quite important for the US economy, may put pressure on the dollar.
What do we have in the end? The downward trend for the euro/dollar pair remains. On the last trading day of the week, traders can lock in part of the profit on open positions. Moreover, such a decision will clearly be favored by statistics from overseas. At the same time, the US currency remains the general trust of traders in times of crisis, while the euro currency does not have such trust. Moreover, now we see that the United States easily accepts multi-trillion-dollar aid packages for the economy, and in the EU there are problems with this, since the EU is not a single state, taking into account the views of its 27 members. Therefore, in the current reality, we are inclined to believe that the euro will continue to fall in price.
The volatility of the euro/dollar currency pair as of April 23 is 73 points. Thus, this indicator does not give reason to expect a new wave of panic. 74 points per day is the average strength of volatility. Today, we expect the pair's quotes to move between the levels of 1.0705 and 1.0851. A reversal of the Heiken Ashi indicator upward may signal a new round of upward correction.
Nearest support levels:
S1 - 1.0742
S2 - 1.0620
S3 - 1.0498
Nearest resistance levels:
R1 - 1.0864
R2 - 1.0986
R3 - 1.1108
Trading recommendations:
The EUR/USD pair continues its downward trend. Thus, traders are now recommended to trade down again with targets of 1.0742 and 1.0705. It is recommended to consider buying the euro/dollar pair not before fixing the price above the moving average line with the first goal of the Murray level of "2/8"-1.0986.
