4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -63.3762
On Thursday, May 27, the EUR/USD currency pair declined slightly, which means that the US currency is strengthening. However, the overall technical picture has not changed at all in recent weeks. The US dollar as a whole continues to fall in price, although it does so at a very slow pace. At least, when paired with the euro. We have already said that the euro has grown by 560 points in the last two months, about 13 points of growth per day. It is minimal.
On the other hand, the problem is not that the euro is growing slowly. The problem is that the current trend is almost recoilless. The nature of the current movement does not allow traders to earn much. At least because the movements themselves are very weak. For the pair to grow by 13 points per day, it is enough to make several turns of movement during the day. These turns can be 50 points up, 40 points down, 30 points up, 20 points down, and 30 points up. It is much more difficult to trade on such frequent changes in the direction of movement than on a strong trend. Movements of 30-40 points do not even allow you to work with Take Profit and Stop Loss. However, all this does not negate that the euro currency has been growing for two months. From our point of view, this is a very significant moment.
Considering that the fundamental and macroeconomic backgrounds are practically absent now, it turns out that the dollar is declining at a meager pace based on the factors that we have repeatedly listed. It seems that the dollar reacts exclusively to monetary injections into the economy from the Fed. It is clear that the QE program, like any cash injections from the US government (the so-called stimulus packages), is not carried out in a couple of days for the entire amount. Most likely, the cash receipts are broken down in time into parts. And it seems that it is precisely to these monetary injections into the economy that the US dollar reacts, declining gradually and very slowly. You can even perform an analysis. Over the past two months, the maximum downward correction was 160 points. It happened once. The last four corrections were 130 points, 80, 80, and 80. Thus, bears are now simply absent from the market. The bulls rule the ball, which from time to time fix profits on long positions, and the Fed, which constantly feeds the economy with liquidity. It is the picture now for the euro/dollar pair.
It leads to the conclusion that all the fundamental factors that seem to influence the pair's movement do not have any influence, or this influence is minimal. What fundamental developments in recent weeks can be identified? Fed minutes, speech by Christine Lagarde, speeches by Jerome Powell and other Fed officials. The Fed's protocol helped the dollar by 50-60 points. Christine Lagarde's speech – another 60-70 points. The rhetoric of all members of the Fed is practically the same and does not cause any reaction at all. It should be understood that if the dollar rose by 60 points during a specific day and around this time, James Bullard made a speech somewhere in the United States and said that the Fed would begin to wind down the quantitative stimulus program sometime in the future. It does not mean that the markets reacted to Bullard's speech. It could just be a coincidence. After all, if you do not take a frank flat, then any pair can move either up or down. That is, matches occur regularly. We believe that the market's reaction to any events can be considered a sharp increase in the movement or a sharp reversal of the price and not a planned movement during the day, which can be based on anything. After all, major players constantly make transactions in the foreign exchange market. Let's assume that on a particular day, the Central Bank of France entered the market and bought several billion dollars for the euro currency. Demand for the dollar has increased, so the dollar itself has risen slightly. And it's not about the "foundation" at all. Such banal transactions of major players are not tracked in real-time at all. Ordinary traders can only try to trade according to the trend, which we constantly recommend.
Thus, the euro/dollar pair continues to be influenced by all the same factors that affected both last year and this year. The US government is pouring trillions of dollars into its economy, inflating the money supply to an excessive size, which leads to a fall in the dollar. After all, not only the euro currency is growing, but also the pound, which in the last year has no fundamental reasons to grow at all. But the pound is also increasing. Now in the UK, specific reasons for the possible strengthening of the British currency are finally beginning to appear. The vaccination program is progressing rapidly, the economy is finally starting to recover, and quarantine restrictions are being lifted. But a couple of months ago, what was the reason for the growth of the pound? We believe that it is solely on the inflation of the money supply in the United States.
Thus, the conclusion remains the same and very obvious. As long as the US government and the Fed continue to pour hundreds of billions and trillions of dollars into their economy, the US dollar will become cheaper, despite what is happening now in the European Union and the UK. Unfortunately, the euro/dollar pair movement is not the most convenient right now, but everything is good and beautiful only in textbooks. Thus, even taking into account the consolidation of the pair below the moving average line, at this time, it does not affect the overall prospects of the currency pair. Moreover, both linear regression channels are directed upwards. The trend is visible.
The volatility of the euro/dollar currency pair as of May 28 is 63 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2127 and 1.2253. A reversal of the Heiken Ashi indicator back to the top will signal a possible resumption of the upward movement.
Nearest support levels:
S1 – 1.2146
S2 – 1.2085
S3 – 1.2024
Nearest resistance levels:
R1 – 1.2207
R2 – 1.2268
R3 – 1.2329
Trading recommendations:
The EUR/USD pair has started a new round of correction. Thus, today it is recommended to open new long positions with targets of 1.2253 and 1.2268 if the Heiken Ashi indicator turns up. It is recommended to consider sell orders if the pair remains below the moving average with the first targets of 1.2146 and 1.2126.
