4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 27.2031
On Monday, May 31, the EUR/USD currency pair traded ultra calmly and spent almost the entire day in a mega narrow channel with a width of about 25 points. Thus, trading in such conditions was complicated and made no sense at all. With daily volatility of 25 points, you can't trade much. In the middle of the American session, a more or less strong movement began. Naturally, with such movements, the technical picture has not changed. Recall that since about May 18, the pair has been mainly between 1.2160 and 1.2240. The quotes briefly left this range twice but then returned to it. Thus, we do not have a classic flat now. However, the movement of the last two weeks is highly similar to it.
All this is happening not far from the three-year highs of the euro/dollar pair, to which the bulls have to pass about 100-150 points. It is noteworthy that the upward movement has stalled, but at the same time, the downward movement has not begun. The bears are not eager to start actively moving the pair down. In addition, do not forget that the United States continues to pour trillions of dollars into its economy, continuing to inflate the money supply. Since there are more dollars globally and, in particular, in the foreign exchange market, its supply increases, but the demand does not grow. That's why the dollar is getting cheaper. Plus domestic US inflation, which also devalues the national currency. The most important thing is that there is no light at the end of the tunnel yet. Both the Fed and the US Congress continue to support fiscal and monetary stimulus. At the end of last week, Joe Biden presented a draft budget for 2022, in which spending will be increased to $ 6 trillion. For example, for the 2021 fiscal year (counted from October 1 of each calendar year), Trump signed a budget of $ 2.3 trillion. That is, Biden proposes to increase spending by almost three times. The budget provides for implementing two stimulus packages for the US economy, which we have already written about earlier. We are talking about a "social" package and an "infrastructure" package. Thus, even more, money will be poured into the US economy than it is now. Well, the Fed is not going to stop the quantitative stimulus program yet, continuing to buy bonds worth at least $ 120 billion a month. Thus, from our point of view, everything is evident for the euro/dollar pair. Considering that the pair has been standing in one place for two weeks, we do not doubt that the upward movement will eventually continue.
Of course, you should always specify what exactly we mean. Any fundamental hypothesis must be confirmed on specific charts. If there is no confirmation, then the theory does not work at this time. What do we mean? Only that we consider the option with a further fall in the dollar as likely as possible. It does not mean that tomorrow the fundamental background will not change, and without technical signals and a corresponding picture, you should not rush to buy the euro and sell to the dollar. Based on our fundamental conclusions, we continue to recommend considering buy signals for the pair and looking for upward trends on the lower charts.
Unfortunately, at this time, macroeconomic statistics have an extremely weak impact on the pair's movement. Thus, in principle, we do not have to expect much from this week. We note the speech of Christine Lagarde on Wednesday, the speech of Jerome Powell on Friday, and the publication of the Nonfarm Payrolls report on Friday. From our point of view, other macroeconomic events have minimal chances to be worked out by the markets. Moreover, it is far from certain that Lagarde and Powell will tell the markets anything important. That is, the speeches of the heads of the Fed and the ECB are potentially important events. They will become important when one or both of the chairman says something that the markets do not yet know. And there are significant problems with this recently. Over the past month, Lagarde has spoken at least ten times, and it is good if one or two of her speeches caused some market reaction. It should be understood that when the calendar shows the speech of the head of the Central Bank, it does not mean that this very head will talk about the economy or monetary policy. Or he will not completely repeat his rhetoric from the previous speech. He can talk about cryptocurrencies, such as the banking sector, the economic recovery after the pandemic, and so on. Thus, it is not evident that there will be any reaction to Lagarde and Powell's speeches at all. The most interesting thing is that the most important report on NonFarm in the United States may also cause no reaction under certain circumstances. Recall that the last report was very weak, and then the US dollar decline against both the euro and the pound. But here, for example, in March, the forecast for NonFarm was, on the contrary, greatly exceeded, but then there was no reaction from traders. Later, it became known that the value of the March Nonfarm Payrolls was revised downwards, but on the day of the publication of the report, market participants could not know about it. We want to say that at this time, it is not at all evident that this or that macroeconomic or fundamental event will be worked out at all, and at the same time, that on an empty day, the pair will not pass 100 points in any direction.
The volatility of the euro/dollar currency pair as of June 1 is 59 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2171 and 1.2289. A reversal of the Heiken Ashi indicator back down will signal a possible new round of downward 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 has started a new upward movement. Thus, today it is recommended to stay in long positions with targets of 1.2268 and 1.2289 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair remains below the moving average with targets of 1.2146 and 1.2085. We also remind you that the pair is now moving almost flat.