4-hour timeframe
Technical details:
Higher linear regression channel: direction - sideways.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 136.1582
The EUR/USD currency pair calmly continued its upward movement on Friday and Monday. To be more precise, the upward movement resumed on Thursday, and on Friday, thanks to the failed statistics from overseas, the movement continued. Well, yesterday, on Monday, traders did not even try to adjust the euro/dollar pair slightly. What do we have in the end? As a result, we have that the upward trend is resumed and it fully meets our expectations. We have been regularly noting for about six months that we expect further depreciation of the US currency. Accordingly, the euro currency, in this case, should grow. And the problem of the US dollar is not even in weak macroeconomic statistics.
Moreover, only Nonfarm payrolls and the unemployment rate were weak, and even then, only in the context of one single month. No one remembers that, for example, GDP in the first quarter in the United States grew by 6.4%. While in Europe, a value of -0.6% was recorded. Thus, the statistics on Friday were only an additional reason for the markets to continue selling the dollar. The main reason is still the same. The American economy is bursting with freshly printed dollars, which is already literally overflowing. However, Joe Biden and Congress are not stopping there and will pass two more stimulus packages, totaling $ 4 trillion. This time we are talking about raising taxes, and it is from this source that two new incentive packages are planned to be funded. However, in reality, we all understand that $ 4 trillion in taxes is unlikely to be collected in a year.
Moreover, we are only talking about additional taxes or an increase in certain types of tax rates. Thus, there is no doubt that most of this $ 4 trillion will be created out of nowhere again. Inflation in the United States will continue to rise, and the US dollar will continue to devalue. Therefore, we can even conclude that the market has nothing to do with it at all. After all, the dollar is falling not because it is massively sold off (although this is also true). The dollar is falling because its amount is growing exponentially.
What happened on Friday that caused the US dollar to sink another 100 points? It's nothing special. The NonFarm Payrolls report, which shows the number of new jobs created outside the agricultural sector and is a key indicator of the labor market state, turned out to be much worse than the forecast values. If experts expected to see +950K - +978K new jobs, in reality, this figure was only 266 thousand. As experts again expected, the unemployment rate rose from 6.0% to 6.1% instead of falling to 5.8%. Before anyone exclaims that these two reports are the most important and the market could not help but react to them, we recall that a month earlier, when the number of Nonfarm was more than 900 thousand, the markets did not respond to these figures. However, at that time, the forecasts were much lower. Therefore, the markets are now just looking for new reasons to sell off the US currency. If the statistics from overseas are bad, we sell dollars. If it's good, we ignore it. It is how things are now in the foreign exchange market. Therefore, in principle, now any statistics are far from the most important for any pair. For example, this Wednesday is scheduled to publish the US inflation report for April, which may accelerate to 3.6% y/y. And some forecasts predict stronger growth in the consumer price index. That is, if these forecasts come true or the actual value is near the forecast, market participants will get another great opportunity to get rid of the dollar. And this can always be explained by the fact that the macroeconomic statistics from overseas are now coming in bad. And no one will remember that before these bad statistics, there were good statistics, and the US dollar was still falling. You can always find an explanation from the field of 10-year treasury yields rising (or falling). And in general, the American economy is recovering faster than anyone else in the world after the pandemic. And the US dollar has been falling for the whole of 2020 and has been declining for more than a month now. However, there is no positive news from the European Union. We can not conclude that everything is just fine in Europe now, so the European currency is growing in price. What are other reports scheduled for this week? In the European Union, industrial production will increase. In the United States – applications for unemployment benefits, industrial production, and retail sales. Thus, perhaps only retail sales (in addition to inflation) can be paid attention to by traders. All other reports are secondary.
In technical terms, the upward movement continues. The Heiken Ashi indicator continues to color the bars purple, the lower channel of the linear regression is directed up, the higher one is turned up. On the 24-hour timeframe, it is visible that the pair is approaching the maximum from February 25, from which it is very close to the 2.5-year highs of the pair. We believe that these price values can be updated as early as May. In the longer term, the US dollar will depreciate for as long as the Fed prints money and the US Congress approves new stimulus packages. Therefore, 2021 is not likely to be the "year of the dollar" again.
The volatility of the euro/dollar currency pair as of May 11 is 70 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2089 and 1.2229. A reversal of the Heiken Ashi indicator downwards signals a round of downward correction.
Nearest support levels:
S1 – 1.2146
S2 – 1.2085
S3 – 1.2024
Nearest resistance levels:
R1 – 1.2207
R2 – 1.2268
R3 – 1.2329
Trading recommendations:
The EUR/USD pair has consolidated above the moving average and continues its upward movement. Thus, today it is recommended to stay in long positions with targets of 1.2007 and 1.2229 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair is fixed above the moving average line with targets of 1.2024 and 1.1963.