4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 190.2388
The EUR/USD currency pair "died" on Friday, and "resurrected" on Monday. The European currency started to grow in the morning. Therefore, it was immediately possible to conclude that the reasons for the growth of both major currency pairs on a day when the calendar of news and events is empty lie in the United States and the dollar. Even guessing for a long time is not necessary on the topic "what happened". Everything lies on the surface, and we have repeatedly mentioned in recent articles that most of the fundamental factors, not to mention the macroeconomic factors, do not matter now. By and large, even the mood of traders does not matter now. There is a situation in the market that it is the big players who can now follow the trend, however, they do not determine and form it. What do we mean? Yes, it is still the same single global fundamental factor that has been discussed a million times. The factor of pumping trillions of dollars into the American economy. This single factor now overrides absolutely all others. From a technical point of view, everything looks like this: the pair grew for most of last year. At the beginning of 2021, a correction began, which lasted for 3 months, after which the upward movement resumed within the main trend. From a technical point of view, everything is clear and beautiful. What about the fundamental one? With the fundamentals, everything is the same. We have said a million times that when the money supply increases as much as it does in the US, it cannot pass without a trace for the foreign exchange market. It can not pass without a trace for the stock market or the cryptocurrency market. By the way, it should be noted that the money supply is growing in many countries, as governments and central banks everywhere support their economies. Therefore, there is much more money in the world as a whole. It's just that in the United States, unprecedented amounts of money are being poured into the economy, so the dollar continues to experience big problems in the foreign exchange market. Everything is logical to the point of absurdity: the money supply is growing, which naturally causes an increase in inflation and a depreciation of the national currency. Where the money supply grows faster, there is faster inflation and depreciation. Inflation in March in the United States jumped to 2.6% y/y and this is far from the limit (for comparison, in the European Union, inflation rose to 1.3% y/y, and then at the expense of food and fuel). The dollar against the euro has lost 17 cents over the past year (from a minimum to a maximum), and this is far from the limit. According to various estimates, in 2020, the US economy was poured by 4 to 6 trillion dollars from the Fed and the government. Of course, it is difficult to say how much of this amount was printed and how much was attracted, however, it is clear to everyone that such a huge amount did not come out of anywhere and did not lie for years in the accounts of the Fed, waiting for the next crisis. Consequently, a certain part of these trillions was printed and sent to the economy. By the way, at first, this money only supported the economy, not allowing it to continue to fall. Inflation did not accelerate in 2020. Many Americans began to save and save money for a "rainy day", so huge amounts remained "under the pillows" of Americans, which slowed down inflation. How can prices rise if the money is not in the economy, but under the pillows? How can inflation accelerate if the country is quarantined, business and economic activity are low? But when vaccination began and the country slowly began to emerge from the pandemic, business and economic activity immediately recovered. People began to spend money again, the deferred demand began to be realized and prices immediately jumped. And they will continue to grow as Americans pull their savings out from under their mattresses.
What to expect in 2021? Yes, all the same. We would like to list here a huge list of factors that will affect the exchange rate of the euro/dollar pair, however, we have long said that most of these factors do not matter now and do not affect the foreign exchange market in any way. The dollar will continue to fall simply because the dollars themselves are becoming more and more in the economy and the foreign exchange market. Accordingly, the US currency depreciates. Thus, major players can simultaneously increase purchases of the US currency or sell off the euro currency, while the euro will still become more expensive, and the dollar will fall. Because the trillions of dollars that are poured into the US economy are much more important than the transactions of even major players in the foreign exchange market. Recall that in 2021, Joe Biden and the US Congress have already approved one package of stimulus measures for $ 1.9 trillion and they want to approve another one (for $ 2.6 trillion) by the summer. At the same time, the Fed continues to buy at least $ 120 billion worth of assets every month. And maybe more. And Jerome Powell, in his recent speeches, has not given a single hint that this program may be reduced or curtailed in the near future. Thus, the process continues to go on. Accordingly, we expect a further fall in the US currency. Even though the US economy is recovering faster than anyone else in the world and is ahead of the European economy. The fall of the dollar, even though it was in Europe that the third wave of the "coronavirus" began, and the pace of vaccination leaves much to be desired. The fall of the dollar even though the US stock market is growing, which means a banal influx of investment in the US economy, which again will allow it to grow and expand. By the way, another perfectly logical answer to the question why is the US stock market growth in a crisis? Because "extra" money from the economy is pumped to it. And there is plenty of extra money in the American economy right now.
The volatility of the euro/dollar currency pair as of April 20 is 60 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1978 and 1.2098. A reversal of the Heiken Ashi indicator downwards will signal a new round of downward correction.
Nearest support levels:
S1 – 1.2024
S2 – 1.1963
S3 – 1.1902
Nearest resistance levels:
R1 – 1.2085
R2 – 1.2146
R3 – 1.2207
Trading recommendations:
The EUR/USD pair maintains an upward trend. Thus, today it is recommended to stay in long positions with the targets of 1.2085 and 1.2146 until the new reversal of the Heiken Ashi indicator downward. It is recommended to consider sell orders if the pair is fixed back below the moving average line with targets of 1.1902 and 1.1841.
