Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 50.4628
The EUR/USD currency pair again traded very calmly on Monday, which is not surprising, since no macroeconomic events were planned for the first trading day of the week. Traders did not find a good reason to trade actively on Monday. Thus, the pair traded in a very narrow range for most of the day, continuing to remain near its local highs and not far from 3-year highs. The technical picture has not changed in any way over the past day. The "foundation" has not changed either. However, this is also not surprising, because to change the global fundamentals that we have been constantly talking about in recent months, really important changes in politics or the economy are needed. In the States under Joe Biden, they continue to spend trillions of dollars to maintain a high rate of economic recovery, fearing China, which "breathes in the back". It is no secret that China is one of the first in the world to recover from the pandemic and the crisis, so the gap in economic power between the United States and China is narrowing. In Washington, they do not want to allow this by all means, so they are ready to endlessly print money and pour it into the economy, stimulating the latter to grow. And no one is interested in what will happen to inflation or the national debt right now. There is a struggle for the first place in the world in the economy. And it is much more important to win than to think about the national debt or inflation. Moreover, as we have already discussed earlier, the national debt for America is not such a big problem, as they like to draw it on this side of the ocean. The dollar remains the main monetary unit of the entire world. Accordingly, freshly printed dollars are flying around the world, slightly leveling the inflationary effect of infusions into the American economy. Most of the US debt is owed to itself since many loans are financed by the Fed or internal funds. As you can see, at any time, you can raise taxes or end the Fed's quantitative stimulus program and start unloading the balance sheet. Thus, so far, the United States is following a very predictable path, which is called "not letting China get close to you."
The most important thing is that the US population itself generally supports the policies of Washington and in particular Joe Biden. Americans like that money are given away for nothing, infrastructure and social problems are solved, and large funds are allocated for them. Therefore, many people like Washington's budget policy, which means that Joe Biden himself enjoys the support of the people. Therefore, we need to continue spending money and two new stimulus packages for another $ 4 trillion are already being prepared. "Americans can now breathe easier and sleep better. The President and I are ready to continue our policy. We plan to take a huge step into the future," said US Vice President Kamala Harris. The United States also supports the tax policy of the Joe Biden administration. Naturally, tax increases for the rich have always been perceived "with a bang" among the middle and lower strata of the population. Moreover, as we can see, the epidemic and the crisis hit these segments of the population the hardest. Therefore, the idea of replenishing the budget and financing new stimulus packages at the expense of the rich is very popular with Americans. Various opinion polls show that the public supports raising taxes for corporations and the wealthy. Opponents of the idea of raising taxes are Republicans, who often represent the interests of rich people in the government. Trump, during his presidency, actively reduced taxes for corporations and billionaires. In addition, several legal loopholes in America allow wealthy people to avoid paying a certain share of taxes, and corporations are quite free to register many of their divisions and industries abroad, where tax rates are much lower. Therefore, a lot of money simply does not reach the US treasury, and it turns out that poor Americans pay much more taxes than the wealthy (in percentage terms). What to say if many of Trump's companies show a loss year after year. Does anyone believe that Trump owns a loss-making business? Thus, the Republicans oppose, but this is not the main thing. Some senators and congressmen from the camp of the Democratic Party also do not support the idea of raising taxes. And they are the ones Joe Biden and his team will need to win over first. For if all the Democrats vote "yes", then the Republican votes will not even be needed. This is how the first $ 1.9 trillion stimulus package of 2021 was adopted. So far, Joe Biden has managed to balance between two fires, without spoiling relations with the Republicans and not backing down from his ideas. Therefore, the main thing for Biden is the support of his party members. If there is a split in the ranks of the Democrats over Biden's policies, then we can expect problems.
For the US dollar, this topic is also very important. First, there may be capital flows from the United States abroad if the new tax rates are approved. Second, another $ 4 trillion will be poured into the economy, further inflating the money supply. Thus, if both stimulus packages are adopted, the US currency is almost guaranteed to continue to fall in price. It continues to do so because of the Fed's $ 120 billion monthly injections and the packages that have already been adopted over the past year. It will be even worse. Plus inflation. If the new packages are not approved by Congress, then we can expect the dollar to fall against the euro to the level of $ 1.27- $ 1.30.
The volatility of the euro/dollar currency pair as of May 25 is 67 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.2147 and 1.2281. A reversal of the Heiken Ashi indicator back down will signal a new round of corrective movement.
Nearest support levels:
S1 – 1.2207
S2 – 1.2146
S3 – 1.2085
Nearest resistance levels:
R1 – 1.2268
R2 – 1.2329
Trading recommendations:
The EUR/USD pair is once again trying to resume its upward movement. Thus, today it is recommended to keep open long positions with targets of 1.2268 and 1.2281 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair is fixed below the moving average with the first target of 1.2146.