On Friday, the EUR/USD currency pair declined as if nothing had occurred. The downward trend was observed for nearly the entirety of the trading day before the pair began to adjust near the close of trading. Intriguingly, the pair began to change (i.e., the dollar became cheaper) after releasing a fairly robust non-farm report. In other words, the market exhibited (at first glance) an utterly illogical response again. On the other hand, we cautioned that the dollar was becoming more expensive for most of the week and updated its 20-year highs against the euro, so if the Nonfarm Payrolls report is positive, the US currency may still decline. This is what transpired. Traders selling the pair throughout the week decided to lock in a portion of their profits on Friday, resulting in an upward trend. However, the following conclusions should be drawn: Despite the upward pullback, the macroeconomic, geopolitical, and fundamental backgrounds have not changed in any way. In other words, all the factors that drove the dollar to 20-year highs continue to exist. Therefore, we have every reason to anticipate that the US dollar will continue to appreciate.
Recall that the Federal Reserve continues to raise interest rates and is willing to do so for as long as necessary to maintain price stability. In the meantime, the ECB continues to contemplate and evaluate rather than take action. Geopolitics remains intricate. Moscow announced that it would soon release a response to Lithuania, which has blocked the transit of sanctioned goods to the Kaliningrad region. There are also inclement conditions surrounding Finland and Sweden, which have joined NATO with one foot. This increases the demand for safe assets, which do not apply to the euro currency.
The "Coronavirus" can destroy the euro.
As Friday demonstrated, macroeconomics also continues to favor the dollar. The most recent reports from the United States appear to be less than stellar, but Friday's Nonfarm Employment Change report indicates that the labor market is in excellent condition. Moreover, the labor market is an essential component of the American economy. And another factor appeared to support the demand for the US dollar last week. We are discussing the age-old, benevolent, "dearly loved" coronavirus. If we are to discuss China in the context of the pandemic, it is quite difficult due to the Celestial Empire's reluctance to share official disease statistics. However, according to the most recent data, several European nations are experiencing a new influx of infections. While the entire world was observing the Ukrainian-Russian military conflict, COVID "gave birth" to several new strains. The infection is now actively spreading in Italy, Germany, France, the United Kingdom, and Spain.
Sincere speaking, a new "wave" of the pandemic could be a death sentence for the European economy. Obviously, this is a very loud statement, as humanity has adapted to life under the "mask regime" over the past two years. However, the economy, which has just returned to pre-pandemic levels, may be "locked up" again, as "lockdowns" are one of the most effective ways to combat infections. And new "lockdowns" represent a new economic decline. A new economic downturn necessitates new incentive programs. The ECB will need to resume printing money, and it will be possible to forget about rate hikes for the next few years. In addition, it should be recalled that when the "coronavirus" first appeared two years ago, the US dollar surged. Later, due to the expansion of the United States money supply, various Fed stimulus programs began to operate, resulting in a sharp decline in the dollar value. And initially, the market was actively buying dollars, as everyone prefers to keep their capital in a "reserve" currency in the event of global instability. As a result, the dollar has a new reason to strengthen further, as there is more global instability than ever before. And from a technical standpoint, everything remains beyond mundane. All indicators point downwards, so there was no reason to purchase the European currency.
As of July 11, the average volatility of the euro/dollar currency pair over the previous five trading days was 113 points, which is considered "high." Thus, we anticipate the pair to trade between 1.0073 and 1.0299 today. The reversal of the Heiken Ashi indicator from up to down will signify the continuation of the downtrend.
Nearest support levels:
S1 – 1.0132
S2 – 1.0010
S3 – 0.9888
Nearest resistance levels:
R1 – 1.0254
R2 – 1.0376
R3 – 1.0498
Recommendations for Traders:
The EUR/USD pair is attempting to initiate a new round of correction. If the Heiken Ashi indicator turns down, consider opening new short positions with targets of 1.0073 and 1.0010 if the market is currently trading at 1.0085. When the pair is fixed above the moving average with targets of 1.0376 and 1.0498, purchases will become relevant.
Explanations for the figures:
Channels of linear regression – aid in determining the current trend. The trend is currently strong if both are moving in the same direction.
Moving average line (settings 20.0, smoothed) – determines the current short-term trend and trading direction.
Murray levels serve as movement and correction targets.
Volatility levels (red lines) represent the likely price channel the pair will trade within for the next trading day, based on the current volatility indicators.
The CCI indicator – its entry into the oversold area (below -250) or overbought area (above +250)- indicates a trend reversal.