The EUR/USD currency pair continued to trade very calmly on Wednesday. On Tuesday evening, the euro currency sharply adjusted to the moving average line but failed to gain a foothold above it, rebounded, and resumed its downward movement. What provoked this evening's movement is not entirely clear. Thus, at the moment, the technical picture of the "Linear Regression Channels" system has not changed at all. Moreover, the technical picture does not change according to the Ichimoku indicator system. On the 24-hour TF, the price is still below all the lines of the Ichimoku indicator, so now there is no question about which trend persists in the market. As mentioned above, there is some lull in the market this week. It is even a little strange to observe the almost complete absence of trend movements, given that the pair remains near its 20-year lows. It is this fact that makes us continue to believe that the fall of the euro/dollar pair will continue. The price is adjusted from time to time against the downward trend, but it cannot show anything more.
I don't want to talk about geopolitics and the fundamental background because they haven't changed for a long time. What could have changed in one or two days if the Fed continued to raise the key rate globally and sell Treasury bonds from its balance sheet (the QT program)? What could have changed in the geopolitical conflict in Ukraine, the biggest conflict in Europe since the Second World War, in one or two days? Kyiv and Moscow reject even the possibility of negotiations with the current government of another country. These factors have brought the European currency to its lowest level in 20 years, so why should they stop acting on the market now? Of course, the euro cannot and will not fall forever, but so far, we do not see a single technical signal or factor that could contribute to the growth of the European currency in the medium term.
Two geopolitical events for escalation.
As many have already said, the Russian Federation launched massive missile strikes on Ukraine at the beginning of this week. Russian officials stated these, adding that all targets were hit. Targets are understood as critical infrastructure and military facilities. Whether this is true or not, we cannot judge. However, new missile strikes on Ukraine have launched several new escalation processes between the West and Russia. Although the new escalation no longer scares or surprises anyone.
A meeting of NATO countries was supposed to take place yesterday. Kyiv considered submitting an official request for more air defense and missile defense systems at this meeting. In particular, the top NATO officials, in particular Secretary General Jens Stoltenberg, assured everyone, even before the meeting, that support for Ukraine would continue as long as needed. He also stated that all of Kyiv's needs for weapons and protection would be met eventually. Therefore, we can expect new air defense systems in Ukraine.
Further, President Vladimir Zelensky appealed to German Chancellor Olaf Scholz with a request to urgently hold a meeting of the G-7 countries. This meeting was also supposed to occur yesterday, but its results are still unknown. However, there is no doubt that it was again about the supply of additional artillery fire and air defense systems. Also, the President of Ukraine asked to impose new sanctions against the Russian Federation. He believes that if the Russian Federation has struck at the energy facilities of Ukraine, then the sanctions should concern the energy sector of the Russian Federation.
It is noteworthy that several officials in Moscow have already reacted to these events. In particular, it was said that the Kremlin would respond harshly to any "terrorist activity" in Kyiv and would achieve nothing by supplying weapons from the West. The new sanctions also do not frighten Moscow since they have already been imposed more than against North Korea and Iran. All this allows us to conclude that the conflict between Ukraine and the Russian Federation continues; the escalation between the West and the Russian Federation continues. Consequently, as risky currencies, the euro and the pound may continue to fall against the US dollar.
The average volatility of the euro/dollar currency pair over the last five trading days as of October 13 is 94 points and is characterized as "high." Thus, we expect the pair to move between 0.9590 and 0.9778 on Thursday. The upward reversal of the Heiken Ashi indicator will signal a new round of upward correction.
The nearest support levels:
S1 – 0.9644
S2 – 0.9521
The nearest resistance levels:
R1 – 0.9766
R2 – 0.9888
R3 – 1.0010
Trading Recommendations:
The EUR/USD pair resumed its downward movement. Thus, it would be best if you stayed in short positions with targets of 0.9644 and 0.9590 until the Heiken Ashi indicator turns up. Purchases will become relevant again no earlier than fixing the price above the moving average with a target of 0.9888.
Explanations of the illustrations:
Linear regression channels help determine the current trend. The trend is strong if both are directed in the same direction.
The moving average line (settings 20.0, smoothed) identifies the short-term trend and the direction in which trading should be conducted now.
Murray levels are target levels for movements and corrections.
Based on current volatility indicators, volatility levels (red lines) are the likely price channel in which the pair will spend the next day.
The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.