4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: 277.6027
On Friday, August 13, the EUR/USD currency pair moved very well and rose by 75 points during the day. Such a movement was somewhat unexpected since volatility has decreased to minimal values in recent weeks, and no important events and publications were planned for Friday. Nevertheless, in the morning, the euro/dollar pair began an upward movement, which lasted all day. The only thing that can be noted from the macroeconomic statistics is the consumer confidence index from the University of Michigan, which unexpectedly fell from 81.2 points to 70.2 points. Such a decline in the indicator of the state of the economy can be explained by the growing number of coronavirus diseases in the United States, which threatens the further rapid economic recovery and the curtailment of the Fed's quantitative stimulus program in 2021. Thus, the US dollar was under pressure on Friday. However, we would also like to remind you that we have been waiting for the beginning of a new upward trend for a long time. We believe that all the technical and fundamental grounds now favor a new campaign to the north. Among the most important reasons, we highlight the following. 1) Two corrections have already been formed against the global upward trend, each of which ended near the level of 1.1700. Consequently, the markets do not expect sales below the level of 1.1700. 2) The pace of sales by major players, according to COT reports, the European currency is declining. 3) The Fed continues to pump the US economy with hundreds of billions of dollars, which continues to provoke high inflation, which devalues the dollar. Thus, we still expect a new upward trend. Currently, the price is fixed above the moving average line, so the trend according to the "Linear Regression Channels" system has changed to an upward one. However, both linear regression channels are still directed downwards, so the bulls' positions are not strong yet. Most likely, the pair is at the point of origin of a new trend.
In the new week, there will be quite a lot of interesting reports and events for traders and questions that should be answered. On Tuesday, the European Union will publish a report on GDP for the second quarter in the second assessment and the level of employment. In the United States, a report on retail sales for July and industrial production for the same month will be published on this day. These are far from the most significant reports. However, on Friday, the markets worked out an even less significant report on consumer confidence. Thus, a reaction may follow if a serious deviation of the actual value from the forecast value is recorded for any of the above reports. On Wednesday, the inflation rate for July will be known in the European Union, and in the US, the minutes of the Fed from the last meeting will be published. The markets can safely ignore both of these events. Especially if the inflation rate practically does not change compared to the previous month (2.2% y/y), and the FOMC protocols rarely cause a reaction at all. Because the information contained in them usually becomes known even during the meeting itself. And the last meeting of the Fed was completely passing. On Thursday, the markets will have to settle for only a secondary report on applications for unemployment benefits in the United States. On Friday, there will be nothing interesting for traders at all. Thus, it may not be the most significant week in terms of "macroeconomics," but still, many interesting reports will be published.
As for the questions that the markets will have to look for answers to, they relate to the QE program in the United States and the "coronavirus." With the quantitative easing program, everything is simple. This week, there will probably be several more speeches by representatives of the Fed. In any case, the discussion of the timing of the possible completion of this program will continue. Recall that the US currency may receive market support, which may even cast doubt on the further growth of the euro/dollar pair if the Fed adheres to the "hawkish" rhetoric. However, the "coronavirus" and its fourth "wave" in America may prevent the regulator from implementing the most "hawkish" plans in the near future. In the last two months, the labor market has been recovering quickly, and the unemployment rate has fallen to 5.4%. However, if the country finds itself in the center of a pandemic again, this will inevitably lead to a new drop in business and economic activity.
Moreover, a new strain of the virus is actively developing, which is even more dangerous, contagious, and deadly for people than all the previous known strains. Thus, no one can say what will happen this fall. It is already summer, and in the warm season, the number of disease cases around the world is growing. The same applies to the States, where the daily increase in diseases is 120-140 thousand people. However, about half of the country's adult population has already received both doses of the vaccine. However, doctors and epidemiologists are already discussing the need for a third ("booster") vaccination, and the virus is also not sitting idly by and is actively developing and mutating. Thus, the phrase "no one knows what will happen in the fall" is not a figure of speech and not a book expression. It is the reality in a world where there has been a "coronavirus" for almost two years. Therefore, from our point of view, it is too early to open champagne at the expense of curtailing the QE program. It is better to wait for specific signals from the Fed and see how the situation with the pandemic will develop. The US dollar may continue to gradually fall in price, as there are no special reasons to go below the 17th level.
The volatility of the euro/dollar currency pair as of August 16 is 43 points and is characterized as "low." Thus, we expect the pair to move today between the levels of 1.1752 and 1.1838. A reversal of the Heiken Ashi indicator downwards signals a round of a downward correction against a new upward trend.
Nearest support levels:
S1 – 1.1780
S2 – 1.1719
S3 – 1.1658
Nearest resistance levels:
R1 – 1.1841
R2 – 1.1902
R3 – 1.1963
Trading recommendations:
The EUR/USD pair started an upward movement and overcame the moving average. Thus, today, you should stay in long positions with targets of 1.1838 and 1.1902 until the Heiken Ashi indicator turns down. Sales of the pair will be possible if the pair is fixed back below the moving average line with targets of 1.1719 and 1.1658, which should be held until the Heiken Ashi indicator turns up.