4-hour timeframe
Technical data:
The upper channel of linear regression: direction - up.
The lower channel of linear regression: direction - up.
The moving average (20; smoothed) - up.
CCI: 55.2293
The EUR/USD currency pair unexpectedly resumed its upward movement to the Murray level of "4/8" - 1.1108, to which it has already reached twice recently. In the first two trading days of the week, there were few macroeconomic events concerning the euro/dollar pair. This explains the newly reduced volatility to 40 points per day. Quite unexpectedly, the upward movement occurred in the Asian trading session on December 11, and not in the European or American session on December 10. Thus, we currently have at our disposal a renewed upward trend, which, however, may end today.
Today, traders will witness two quite important fundamental events. The first of them is the US consumer price index for November, which, of course, can reach 2.0% y/y. That is, it will coincide with the target inflation rate of the Fed. If this happens and the real value of the CPI does not disappoint traders, the US dollar may be in high demand immediately after the publication of this report. The second main event of the day is the Fed meeting, and it can also provide very significant support to the US currency. First, the probability of reducing the Fed's key rate for the fourth time is 0%. Neither analysts nor traders believe that the Federal Reserve will again go on easing monetary policy. Second, there is no reason to even speculate and debate "whether a new monetary easing is needed", as macroeconomic statistics from overseas in recent weeks have frankly pleased investors. Strong labor market data (NonFarm Payrolls report), 50-year minimum unemployment, good GDP growth, and good wage growth. And if today inflation also accelerates to 2.0%, then in general, it will be possible to state with confidence that everything is all right with the economy of the United States. Consequently, there is no point in the Fed lowering the rate or planning anything like that any time soon. Not a rate cut - this is a neutral factor for the euro/dollar currency pair, but with a slight bias in favor of the US dollar. It will all depend on the rhetoric of Jerome Powell. If the chairman of the Fed will be full of optimism, focusing on strong macroeconomic statistics and hinting that with such an economic growth rate, a rate hike is possible in the future, then traders may respond to such statements with purchases of American currency. If Powell takes a wait-and-see attitude and does not make any loud statements, then there may be no reaction, and the entire meeting of the Fed will become completely transparent.
We are inclined to the second option. It is unlikely that Jerome Powell, after three rate cuts in a row, will immediately begin to hint at tightening monetary policy in the future. Most likely, after all, the Fed and Powell will take a wait-and-see position. And they will wait until the moment when macroeconomic statistics will again begin to slow down and deteriorate due to the actions of Donald Trump on the world stage. For example, on December 15, Trump may impose new duties on Chinese imports, which will amount to 160 billion dollars. Of course, China will respond with its sanctions, and instead of signing the agreement in the "first phase", we will be able to ascertain the escalation of the trade conflict, as well as witness a new portion of the exchange of courtesies between Beijing and Washington. Also, we should not forget about the odious US President Donald Trump, although it is very difficult to forget about him. With a high degree of probability, Trump immediately after the announcement of the results of the Fed meeting will again criticize both the US regulator and Jerome Powell personally. It is good that Powell seems to be no longer going to follow the lead of the US President, who needs a rate cut for his foreign economic policy, the effectiveness of which is bursting at the seams about a year before the presidential election, in which Trump is going to win.
From a technical point of view, the euro/dollar resumed its upward movement, but already at the European trading session, there may be a downward reversal and, at least, a round of downward correction. Previously, the fundamental background today will be either neutral or in favor of the US currency. Thus, it is quite reasonable to expect the strengthening of the US dollar today, given the fact that there were no significant reasons for the purchase of the euro currency by traders.
The average volatility of the euro/dollar currency pair has not changed in recent days and is 42 points per day. Thus, the channel in which the pair can move today is limited to the levels of 1.1050 and 1.1134. However, to work out the upper or lower boundary requires movement in one direction throughout the day. Today it is possible. Slightly higher volatility than 42 points is also possible. However, major movements are expected in the afternoon and evening.
Nearest support levels:
S1 - 1.1078
S2 - 1.1047
S3 - 1.1017
Nearest resistance levels:
R1 - 1.1108
R2 - 1.1139
R3 - 1.1169
Trading recommendations:
The euro/dollar pair started an upward movement. Thus, purchases of the euro with the goals of 1.1108 and 1.1134 remain relevant. However, given the fundamental background of today, as well as the fact that the Heiken Ashi may turn down in the coming hours, we would not recommend buying the euro today. It is recommended to buy American currency no earlier than traders overcoming the moving average line with the target of 1.1047.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustrations:
The upper channel of linear regression - the blue line of the unidirectional movement.
The lower channel of linear regression - the purple line of the unidirectional movement.
CCI - the blue line in the indicator window.
The moving average (20; smoothed) - the blue line on the price chart.
Support and resistance - the red horizontal lines.
Heiken Ashi - an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.