4-hour timeframe
Amplitude of the last 5 days (high-low): 27p - 49p - 31p - 70p - 25p.
Average volatility over the past 5 days: 41p (average).
On Tuesday, December 10, the EUR/USD currency pair continues to trade near the critical Kijun-sen line and can even overcome it in the near future. However, until this happens, certain chances remain for the resumption, after the correction, of the downward movement. "Certain" - because the pair again shows weak volatility. Because it is not known how the meetings of the European Central Bank and the Federal Reserve will end, which traders are openly waiting for. Because it is not known whether Donald Trump will introduce a new package of duties against China on December 15 worth $160 billion. It is not known whether the euro/dollar pair will return to the paradoxical situation that we described a few weeks ago. Indeed, in fact, the situation for the EUR/USD pair has not really changed much over the past few weeks. Quotes are still close to two-year lows. Bulls are still weak. Bears still can not find enough good reasons to continue trading on the decline. Based on this, the pair may even return to a flat now and ignore the meetings of the Fed and the ECB. Moreover, any adopted changes in monetary policies are not expected in the meetings. However, at the moment, traders should still focus on the two next important events, the Fed and the ECB.
From our point of view, the Fed meeting, which will be held tomorrow (more precisely, its results will be summed up tomorrow), will not present any surprises or any interesting information to traders. It is no secret that Jerome Powell and the company have already decided that a pause of at least a few months should be taken in the US monetary policy easing cycle. In the future, if the geopolitical situation in the world continues to increase, if the United States and China fail to find a common language and end the trade war, if Trump continues to unleash trade wars left and right in the last year of his presidency, then monetary policy may be softened again. This will be a necessary step of the Fed. But the decision to lower the key rate will be made explicitly on the basis of macroeconomic statistics, which will best respond to all of the above factors. Even Donald Trump himself is unlikely to be able to influence the Fed now, since Powell lowered the key rate three times in a row, partly going to a meeting with the US president. No one will ever know if Powell's decisions included the "Trump factor", which mercilessly criticized the Fed chairman for a year (and still continues to criticize him now). However, Donald Trump definitely also influenced the threefold easing of monetary policy. But a further rate cut is unlikely to happen because Trump needs to win a trade war with China, and this is difficult to achieve when Beijing has power over its central bank and, accordingly, over monetary policy and the national currency, and the US president does not have such power. Trump needs ultra low rates so that the trade balance begins to equalize in favor of the United States, that the dollar becomes cheaper, and accordingly, it becomes easier for foreign consumers to buy American goods. However, Jerome Powell is not obliged to follow Trump and his organization clearly has its own goals and strategies. Thus, we do not expect any special changes in the monetary policy of the Fed.
As for the ECB meeting, everything is much more interesting as the debriefing of which will take place on Thursday. Firstly, this will be the first meeting led by Christine Lagarde. Secondly, the mood of the new president of the ECB could be called dovish, since Lagarde has focused on the weaknesses of the eurozone economy, urged the governments of the EU countries to invest more in their own economies, saying that "strategic changes are needed". Thus, we are fully entitled to rely on the fact that the European regulator will go for a new rate cut or for expanding the QE program, and possibly both. In any case, such steps by the ECB do not bode well for the euro. These actions by the ECB may well be enough for the bears to start selling the euro again and put pressure on the EUR/USD pair in the medium and long term. It remains only to find out when Lagarde is going to cut rates and what strategic changes will be made? All this we can find out from Lagarde's press conference on Thursday. It is unlikely that the ECB rate will be reduced in the first months of the work of the new chairman. Consequently, one should keep a close eye on Lagarde's allusions to future actions.
The technical picture of the EUR/USD pair is now such that lateral movement may well resume. Moreover, it may not end tomorrow, but, for example, on Thursday, or even persist all week. As we have already figured out, the Fed meeting may become a passing one, the inflation report in the States (scheduled for tomorrow) may turn out to be neutral and not cause traders' reactions. Thus, formally, there is now a short-term downward trend, but the "dead cross" is weak, and the price is threatening to consolidate back above the Kijun-sen line.
The technical picture of the EUR/USD pair is now such that sideways movement may well resume. And it can end not tomorrow, but, for example, on Thursday, or it might even persist all week. As we have already seen, the Fed meeting could become a walk-through, the report on inflation in the United States (scheduled for tomorrow) may turn out to be neutral and not cause a reaction of traders. Thus, formally, there is now a short-term downward trend, but the Death cross is weak, and the price threatens to consolidate back above the Kijun-sen line.
Trading recommendations:
The EUR/USD pair has taken a big step towards a new downward trend. However, in order to be able to buy the US dollar, you need to wait for the Ichimoku cloud to be overcome, which will strengthen the sell signal. In this case, the bears will be able to sell the euro/dollar pair while aiming for 1.1022 and 1.1004. It is recommended to resume purchases of the euro in the event that traders regress above the critical line, but even in this case, you should be extremely careful when buying, since the pair still does not have significant fundamental growth factors.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicator window.
Support / Resistance Classic Levels:
Red and gray dotted lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movement options:
Red and green arrows.