4-hour timeframe
Technical details:
Higher linear regression channel: direction - sideways.
Lower linear regression channel: direction - sideways.
Moving average (20; smoothed) - upward.
CCI: 138.9461
The EUR/USD currency pair remained above the moving average line at trading on Monday, which means that it continues to maintain an upward mood. Thus, the upward movement may continue, especially since this is exactly the scenario we expect. From a technical point of view, on Monday, there was also a rebound from the moving average, which again increases the likelihood of continued growth. We have repeatedly said that the pair has two global technical factors to continue the upward movement. These are bounces from the Senkou Span B line on the 24-hour timeframe and the 50.0% Fibonacci level from the last two-month round of upward movement. These signals in the global plan to continue to maintain an upward trend. However, we should not forget about the global fundamental factors. In recent months, we have regularly drawn the attention of traders to two global factors that could be the reasons for the strong fall of the US currency in the last 11 months. This is "a factor in the ratio of the American and European (or British) economies" and "a factor in the huge monetary injections into the American economy as part of stimulus measures". At the same time, in recent months, the first factor can be said to be leveled, since the American economy is recovering faster than the British or European, and at the end of the fourth quarter of 2020, in annual terms, it showed a smaller contraction. Simply put, as of the fourth quarter of 2020, the US economy shrank less compared to the fourth quarter of 2019 than the European Union or the UK. Thus, we only have at our disposal the factor of "huge cash injections into the American economy", which banally increased the supply of the dollar in the markets, which led to a fall in its exchange rate.
Thus, we decided to turn to unpopular macroeconomic statistics, which usually no one pays attention to. Namely, the aggregates of the money supply M0-M1-M2-M3. In the United States, the units M0-M2 are published, in the European Union – M1-M3. But to compare the EU and the US, we only need general trends. For the States, we took a graph of the change in the money supply aggregate M0. It is the most liquid, as it reflects changes in the amount of cash in the economy. It does not take into account any other funds.
The illustration clearly shows that until 2020, the money supply of M0 decreased in volume. This does not mean that there was less money in the economy, on the contrary, the Fed has been pumping money into the economy since 2008 in response to the crisis of that year. However, most of the money introduced into the economy is not cash. Simply put, it is the bank's money. You have been credited, for example, 1000 dollars to the account. Do you have any money? There is. Can you touch them? No. That's why the money supply of M0 has been falling in the last five years. However, look at what happened in 2020. The volume of the cash supply has grown one and a half times and in just one year. What does this mean? The fact that the economy began to receive hundreds of billions of dollars, with cash. Now let's take a look at similar data for the European Union.
This is a graph of the change in the M1 money supply over the past 25 years. We see steady growth and only a slight acceleration in the M1 expansion in 2020. Recall that the money supply M0 for the European Union is not published, and the money supply M1 is cash plus deposits. Thus, in 2020, the M1 money supply in the European Union increased by 10 percent from a value of 9,000,000 to a value of slightly more than 10,000,000 (measured in millions of euros). The difference, as they say, is on the face. In the United States, the money supply grew by one and a half times in 2020, and in the EU – by 10%. However, to be quite honest and fair, let's take the money supply indicator M1 in the United States.
What do we see in America? The money supply of M1 in 2020 also increased by more than one and a half times. From a value of 4000 (billions of dollars) to a value of almost 7000. That is, as a summary, we can say that the amount of money in the United States in 2020 increased by at least one and a half times. It doesn't matter where the money was taken from. There was more money. In the European Union, the money supply increased by 10% in the same year. That is why we insist that if the process of pumping the US economy with dollars continues, then the US currency will continue to become cheaper. Recall that according to the latest data, out of the $ 4 trillion of the last package of stimulus measures, about $ 1 trillion remained unspent a couple of weeks ago. This $ 1 trillion, of course, will be poured into the US economy. Also, the US Congress is due to approve a new $ 1.9 trillion stimulus package any day now. Republicans, while unable to block the bill, continue to fiercely resist it and may yet be reduced in size. However, it is unlikely to make much difference. This means that another 1.5 trillion can be expected. And this means that during 2021, another $ 2.5 trillion can be poured into the American economy, and this is not counting the money that the Fed is pouring into the economy, buying at least $ 120 billion worth of securities from the open market every month. Thus, from our point of view, until this process stops, there is no need to even think about the US dollar stopping falling. And, by the way, the States themselves benefit from a "cheap" dollar. Donald Trump stated this. The national debt growing like a snow globe. But Americans are no strangers to living in debt, and this system works and it has been working for decades.
The volatility of the euro/dollar currency pair as of February 23 is 73 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.2092 and 1.2238. A reversal of the Heiken Ashi indicator downwards may signal a round of downward correction.
Nearest support levels:
S1 – 1.2146
S2 – 1.2092
S3 – 1.2024
Nearest resistance levels:
R1 – 1.2207
R2 – 1.2268
R3 – 1.2329
Trading recommendations:
The EUR/USD pair continues to move up. Thus, today it is recommended to stay in long positions with targets of 1.2207 and 1.2238 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair is fixed below the moving average, with a target of 1.2024.