4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -220.7027
The EUR/USD currency pair fell on Friday. Of course, you can always say that buyers have recorded a part of the profit. However, from our perspective, the fact is that the pair was banally very overbought for a short period. The pair began to grow on March 31. It grew for exactly a month, and during all this time, there was not a single sensible correction, only small pullbacks. Thus, a correction was brewing. At the same time, traders should pay attention to the fact that Friday's macroeconomic statistics from the Eurozone are not the reason for this fall because three important reports were published in the EU. It is not to say that traders took one report into account and ignored the other two. Otherwise, there will be no sense in macroeconomic statistics at all. It will always be possible to "pull up by the ears" any pair's movement to any report, stating that all other data was ignored. And the statistics from the EU were contradictory. If inflation rose and this is bad for the euro, then the unemployment rate fell, and GDP, although it shrank in the first quarter, fell less than markets expected. So, from our point of view, nothing has changed globally. We still have a global upward trend, which was interrupted by a three-month correction earlier this year. A month ago, this correction could have ended, so at this time, for about a month, we can see an attempt to resume the upward trend. The fundamental reason is still the same. They were flooding the American economy with trillions of freshly printed dollars. The money supply is growing, which negatively affects the dollar exchange rate.
In recent weeks, more and more experts have been paying attention to how the US economy is being given a rapid recovery. The US Congress and Joe Biden set out to develop a new $ 2 trillion stimulus package every month. At the beginning of the year, a package worth $ 1.8 trillion was implemented, and now two more packages worth $ 1.9 trillion and $ 2.25 trillion are being discussed. In the first half of the year, 6-7 trillion dollars can be poured into the American economy. Naturally, when the money supply inflates at such a pace, it is hardly worth talking about the growth of the US currency. In general, the topic of financing all these packages in the United States is very interesting. The game is called "find where the money comes from." Some believe that the money is constantly printed by the Fed and then buys back the government's debts. Some believe that it's all about government funds that constantly lend. Some believe that it's all about the bonds that the government constantly places. However, not as always. It is somewhere in the middle. The US government uses all available means to find money when it is needed. Money in the United States is created out of nowhere, in bank accounts, through various credit schemes, where the government seems to borrow money from itself, through the Fed, which is not controlled by the president and Congress, but at the same time acts for national purposes. If this scheme is greatly simplified, then money in the United States is a tool for controlling the economy. If in other countries they are afraid to print money in trillions, as this leads to uncontrolled inflation, which is then very difficult to repay, then in the United States there is no such problem, because dollars fly around the world very quickly, because this is the main currency for the whole world, no matter what anyone says. Of course, no one prints money unnecessarily. However, there is a need at this time, so the Fed prints how many dollars it will need, and the government is in full swing placing bonds and is going to raise taxes for the rich. And it seems that it is the tax increase for the rich and corporations that will be the tool to remove the extra dollars from the economy. Judge for yourself, if the latest stimulus packages are implemented, then according to the most conservative estimates, the money supply in the United States will increase by $ 10 trillion. No one knows the exact figures, if only because the Fed has a rather vague interpretation of the QE program: at least $ 120 billion a month. One trillion is also at least 120 billion. Thus, the new incentive programs will allegedly be funded from taxes. The programs that are going to be financed by two new packages will be implemented in 2021. And when will the money for these programs come from taxes? They will begin to arrive in 2021, but it is unlikely to amount to $ 4 trillion immediately. Thus, one way or another, the necessary money will again be created out of thin air. And with the help of the new tax legislation, money will be steadily withdrawn from the economy and sent to the government, which can banally withdraw it from circulation. Of course, it is not a fact that everything will be exactly like this. The Fed can formally print dollars indefinitely. You need to have a clear understanding of the entire global economy and cash flows to suggest what might happen if the money supply continues to grow forever. However, it can do this in theory.
Thus, all the reflections presented above are not in favor of the US currency. Moreover, the fall in the dollar may be just the initial stage of the global "anti-dollar trend." After all, it's no secret that global trends take 10-12 years. Perhaps now we are just at the beginning of a new upward trend for the euro/dollar pair, which will be observed over the next 8-9 years.
The volatility of the euro/dollar currency pair as of May 3 is 66 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.1953 and 1.2085. A reversal of the Heiken Ashi indicator to the top will signal a round of upward 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 has consolidated below the moving average, so the trend has changed downward. Thus, today it is recommended to stay in short positions with targets of 1.1963 and 1.1920 until the Heiken Ashi indicator turns up. It is recommended to consider buy orders if the pair is fixed above the moving average line with a target of 1.2146.