The EUR/USD currency pair on Thursday again showed quite mediocre volatility. Despite releasing at least four significant reports during the day, the market traded with a distinct lack of enthusiasm. And these reports can not be called insignificant, and their values - neutral. Quite the contrary. Labor market data and ISM index - these data should strongly influence the pair's movement. However, we saw a 67-point movement and a small increase in the dollar immediately after the publication of the statistics. And by the end of the day, the US currency had lost all the "hard-earned" gains.
Thus, we can once again conclude that the market is in no hurry to buy American currency despite two additional key rate hikes by the Fed planned for this year. It remains uncertain how much more the European Central Bank will tighten its monetary policy, but we maintain that the rate's peak is near. In any case, all the movements of the last six months are local. The pair remains in the 1.05-1.11 range, i.e., continues to consolidate. There is no strong fundamental background to provoke a new powerful upward trend or start a downward trend. Therefore, the pair continues to trade in a 600-point range. On a 4-hour TF, such movements can look scary, but on a daily chart, we see that the market is essentially flat.
It was impossible to fix below the last local minimum on the 4-hour TF. Overcoming the moving average also failed. Therefore, in essence, all the movement we saw this week is best described by the concept of "flat." We have already said that trading with low volatility is extremely difficult. On a 5-minute TF, you can still count on some profit, but on older TFs, you need to hold the deal for several days to count on income. For example, if you opened a sell trade on Monday, at this point, it would be profitable by about 30 points. And catching every 2-3 hour movement is physically impossible. Let alone predicting the values of all published reports.
The ADP report yesterday showed 0.5 million new jobs in June. The forecast was exceeded more than two times. What else does the market need to increase demand for the dollar? However, the ADP report has always been considered the "younger brother" of NonFarm Payrolls. Almost every time, we see that the dynamics of the values of both reports do not coincide. It's hard to say why this happens, but the market has long trusted NonFarms more than ADP. Thus, if many new jobs in the US economy are confirmed today, the dollar may strengthen significantly more than yesterday. The downward trend is now present, so we can still count on the pair's decline.
The second significant report on Friday is the unemployment rate. Over recent months, it has increased slightly from its absolute minimum of 3.4% but remains very close to it. Therefore, from our perspective, an increase in unemployment to 3.8% cannot be considered a "failure." Official forecasts suggest maintaining the value from May or slightly decreasing to 3.6%.
By the way, the Nonfarm Payrolls forecast is again neutral – 225-250 thousand. Remember that any value above 200 thousand can be considered positive, so this indicator cannot constantly grow in arithmetic or geometric progression. Before the pandemic, 200 thousand was considered a normal value. And over the last 12 months, the report has never shown a value below this. Last month it rose to 339 thousand. Therefore, based on the recent reports of this indicator and the ADP report, we can also expect a high-value today. In any case, not below the forecast. The dollar has a good chance today to appreciate a little further.
The average volatility of the EUR/USD currency pair over the last 5 trading days as of July 7 is 65 points and is characterized as "medium." Thus, we expect the pair to move between the levels of 1.0828 and 1.0958 on Friday. A downward reversal of the Heiken Ashi indicator will indicate a new wave of downward movement.
The nearest support levels are:
S1 – 1.0864
S2 – 1.0803
S3 – 1.0742
The nearest resistance levels are:
R1 – 1.0925
R2 – 1.0986
R3 – 1.1047
Trading recommendations:
The EUR/USD pair went into a flat at the beginning of the week but still shows signs of continuing to fall. Short positions should be considered with targets at 1.0828 and 1.0803 in case of a Heiken Ashi indicator reversal downwards or a price bounce from the moving average. Long positions will become relevant no earlier than the price consolidates above the Murray level of "3/8" - 1.0925 with a target of 1.0986.
Explanations for illustrations:
Linear regression channels - help determine the current trend. If both are directed in the same direction, the trend is strong.
Moving average line (settings 20.0, smoothed) - determines the short-term trend and the direction in which trading should now be conducted.
Murray levels - target levels for movements and corrections.
Volatility levels (red lines) - the likely price channel the pair will spend the next day, based on current volatility indicators.
CCI indicator - its entry into the oversold area (below -250) or the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.