The EUR/USD currency pair paused on Friday. It simply stopped after a four-day rally without even attempting a correction. And this, once again, is all you need to know about the justification for the recent rise of the European currency. There should be a small correction after the euro currency rose unjustifiably by 70–80%. But where can the correction come from if the market refuses to book profits on long positions? Naturally, if the buying doesn't stop, there won't be any decline.
The only noteworthy macroeconomic event on Friday was the University of Michigan Consumer Sentiment Index in the United States. It rose from 64.4 to 72.6, significantly exceeding expectations. Therefore, the dollar was supposed to strengthen on Friday, as the deviation from the forecast's actual value was substantial (the forecast was 65.5). But no, despite all the necessary macroeconomic and technical justifications, we didn't see any correction. Therefore, no new conclusions can be drawn about the pair's movements. The euro currency continues its rise, which cannot even be explained or justified in hindsight. It's impossible to predict how long the market will continue buying the euro. The only option is to trade according to the trend, which is currently strong and favorable.
We don't mean that we are waiting for a correction to open short positions. On the contrary, selling on an upward trend is a thankless task, even if it seems this trend will soon end. But as we can see, it is not ending, and the price cannot drop below the moving average. Therefore, we can admire the current movement and simultaneously profit from it.
Empty Eurozone calendar.
The key question for the next week is whether the euro will continue its mindless and crazy growth. We are fine with looking at the event calendar right now. Why bother when the market pays no attention to the macroeconomic background? Nevertheless, let's list the events scheduled for the next week in the European Union. Moreover, there will be very few of them.
There will be no events or reports on Monday or Tuesday. On Wednesday, the Consumer Price Index for June will be released in its final assessment, which is unlikely to differ significantly from the previous one. Most likely, inflation will decrease to 5.5%, and core inflation will increase to 5.4%, guaranteeing a rate hike in July. If the euro currency rises even on this report, the curtain can be lowered.
The events calendar is empty on Thursday and Friday. We do not exclude the possibility that some representatives of the ECB Monetary Committee may give speeches during the week. However, recently, when the market knew that another 0.25% would raise the rate in July, new and important information had yet to be received from them. Therefore, practically no important news will come from the European Union next week.
Can the euro currency continue to rise? Of course, there is still the United States, and there will be things to pay attention to. However, weak reports and events will only provoke a further decline in the dollar, while strong ones are far from guaranteed to help it grow even slightly. Thus, the main focus should currently be on technical analysis. As long as the price remains above the moving average, it makes no sense to consider selling. The market is currently in a state where purchases can continue because the euro is rising, meaning that each open position will be profitable. A correction would be the most logical scenario for the next week, but we repeat: it may not happen. Friday showed us that the market is not inclined to any corrections.
The average volatility of the euro/dollar currency pair for the last five trading days as of July 16 is 77 pips, characterized as "average." Therefore, we expect the pair to move between the levels of 1.1150 and 1.1304 on Monday. A downward reversal of the Heiken Ashi indicator will indicate the start of a downward correction.
Nearest support levels:
S1 - 1.1169
S2 - 1.1108
S3 - 1.1047
Nearest resistance levels:
R1 - 1.1230
R2 - 1.1292
R3 - 1.1353
Trading recommendations:
The EUR/USD pair continues its almost vertical upward movement. It is advisable to stay in long positions with targets at 1.1292 and 1.1304 until a downward reversal of the Heiken Ashi indicator occurs. Short positions will become relevant only after the price consolidates below the moving average line with targets at 1.1047 and 1.0986.
Explanations for the illustrations:
Linear regression channels - help determine the current trend. If both channels move in the same direction, it indicates a strong trend.
Moving average line (settings 20,0, smoothed) - determines the short-term trend and the direction for trading.
Murray levels - target levels for movements and corrections.
Volatility levels (red lines) - the probable price channel the pair is expected to trade in the next few days, based on current volatility indicators.
CCI indicator - its entry into the oversold zone (below -250) or overbought zone (above +250) indicates an upcoming trend reversal in the opposite direction.