4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 332.9041
Well, the epic of the EU summit, which lasted for 4 days, is over. The parties still managed to agree on all the key issues, and the EU leaders can now breathe more freely – the Eurozone is saved! As for the movement of the euro/dollar currency pair, it has not changed at all since the results of the meeting became known. The euro continues to move up with exactly the same amplitude and speed as before, so we can say that market participants simply ignored such an important and historic decision that was made in Brussels. However, this does not mean that this event and decision will not have a long-term impact on the euro/dollar currency pair. After all, now the countries most affected by the "coronavirus crisis" will be provided with financial assistance. This means that their economies and the economy of the European Union as a whole will begin to recover at a faster pace than it could without the 750-billion package. Unfortunately, this 750 billion won't come out of nowhere. They will be attracted to the financial markets and, in fact, will mean a loan for the European Union, which will be redistributed among the most needy countries in the form of the same loans and grants (free of charge). This means that we will have to pay back this 750 billion, and given that this amount is huge even for such a serious organization as the European Union, it will take a very long time to pay it and the interest on it. Thus, it is really impossible to say that a strong event for the euro currency took place in Brussels. The alliance simply decided to take out a large loan, which it will pay back for years. Now we can only pray that there will not be a second wave of coronavirus in Europe, which can again hit the economy. After all, even if Brussels also refuses a new quarantine or "lockdown", it will mean that the economy will slow down. The United States is a clear example of this. A huge number of cases of the disease, but a new quarantine is not being introduced across the country, as Donald Trump, Steven Mnuchin and others believe that it can finish off the American economy. However, if people are afraid of getting sick, their economic activity will decrease significantly. And economic activity is of great importance for the economy.
However, we will not speculate on the coffee grounds whether the second wave will happen in Europe or not. Let's go back to the summit itself and its results. The final budget for 7 years in the European Union will be 1.074 trillion euros. All participants of the summit were satisfied with the agreement reached, and the President of the European Council, Charles Michel, said at a press conference: "Europe is strong, Europe is united. We did it! We have reached an agreement on the budget and the economic recovery fund. It was a difficult negotiation, but it ended with a strong and good deal." "For the first time in history, the budget has been agreed taking into account the solution of climate problems. This agreement is about jobs, health and well-being of the European nation," said Charles Michel. European Commission chief Ursula von der Leyen said in turn: "The budget covers the "green deal". We are investing in the future of the European Union. Europe now has a chance to get out of the crisis." Under the "green deal", the head of the European Commission understands the transition of the European economy to an eco-friendly basis. French President Emmanuel Macron said after the summit that "taking into account the recovery fund, the European budget has actually been doubled for the coming years." "Today we have a seven-year budget and a recovery plan that is approaching 2% of the EU's GDP," said Macron. It is also reported that for the first time in the history of the EU, debt obligations will be on behalf of the entire EU, that is, all EU countries will pay off the debts for the 750 billion euros. Up to the year 2058. Recall that earlier such an idea, called "coronabonds", was repeatedly rejected precisely because of the reluctance of some EU member states to undertake obligations to pay loans and interest on loans, while the money will be provided to other EU countries. "All EU leaders agreed on the need to place common loans and pay off these loans in order to finance the economic recovery," the French President concluded.
And of course Italy is elated. Rome will receive 209 billion euros (about 28%) from the reconstruction fund. Of these, 81 billion are in the form of grants and 127 billion in the form of loans. "We are satisfied because we have approved an ambitious recovery plan that matches the scale of the crisis," Italian Prime Minister Giuseppe Conte said. "Now we must use these funds for investment and reform. We have a real chance to make Italy greener, more digital, more innovative, more sustainable. We have the opportunity to invest in schools, universities, research and infrastructure," Conte concluded. Greece is also happy, which will receive 32 billion euros from the fund, and about 40 more from the EU budget. Its Prime Minister, Kyriakos Mitsotakis, said: "For the first time, our country gets access to such serious financial instruments. We are returning to Athens with a total package exceeding 70 billion euros. This is an unprecedented size for our country." It also became known that Spain will receive 140 billion euros from the economic recovery fund, and Poland – 160.
In addition to the completion of the EU summit on Tuesday no important news and macroeconomic reports available to traders have not been received. Approximately the same fundamental picture will be observed on Wednesday, July 22. Given that the nature of trading on the euro/dollar pair has not changed at all, we still believe that the situation in the United States is important for traders. Namely, the political, social, epidemiological and economic crisis. Congress is currently working hard on the latter, preparing to provide at least another trillion dollars in aid to the American economy. However, most likely, this news will also not find a momentary reflection on the chart of the EUR/USD pair. Thus, the technical picture is now important and according to it, the formation of an upward trend continues. Slow and uncertain. But the bulls continue to buy the euro and get rid of the US dollar, which in recent months has completely lost the status of a currency that everyone always buys. Both channels of linear regression are directed upwards, so there is no doubt about who now dominates the market.
The volatility of the euro/dollar currency pair as of July 22 is 78 points and is still characterized as "average". Thus, we expect the pair to move today between the levels of 1.1462 and 1.1618. The reversal of the Heiken Ashi indicator downwards signals a turn of a downward correction within the framework of an upward trend.
Nearest support levels:
S1 – 1.1475
S2 – 1.1414
S3 – 1.1353
Nearest resistance levels:
R1 – 1.1536
R2 – 1.1597
Trading recommendations:
The EUR/USD pair resumed its sharply increased upward movement. Thus, it is now recommended to stay in purchases of the euro currency with the goals of 1.1597 and 1.1618, until the reversal of the Heiken Ashi indicator down. It is recommended to open sell orders no earlier than the pair is fixed below the moving average line with the first targets of 1.1353 and 1.1292.