4-hour timeframe
Amplitude of the last 5 days (high-low): 76p - 28p - 56p - 38p - 27p.
Average volatility over the past 5 days: 45p (average).
The second trading day of the new week for the European currency paired with the US dollar again went exactly as the scenario. The upward correction turned out to be very weak and the downward movement resumed, even taking into account the absence of any important macroeconomic statistics for today. It could be said that data from the ZEW Institute pulled down the euro, however, two out of three reports turned out to be higher than the forecast values, and significantly higher. Thus, it would be much more logical to see the further strengthening of the European currency, even if it is weak. Moreover, the correction at the time of publication of reports from the ZEW Institute had already begun, respectively, it was easy to continue with the proper fundamental background. But that did not happen. ZEW reports are frankly secondary, and today more important publications and news from the European Union and the United States have not been received. Thus, traders simply resumed sales of the European currency as part of a downward trend, which we talk about in the last week every day. This trend is justified by the commonplace negative common fundamental background for the euro, as well as technical factors such as a double rebound from the level of 1.1175.
Meanwhile, as currency pair traders suffer from a lack of interesting macroeconomic statistics, US President Donald Trump decided, according to unverified and insider information, to postpone the decision to impose duties on cars from the European Union for six months. Recall that earlier the European Union lost the court to the United States regarding the case of illegal subsidization of Airbus, as a result of which US companies suffered losses, as these companies were in unequal conditions with Airbus and could not compete fully and honestly with the French company. Thus, the United States received official permission to introduce duties for a certain amount of goods from Europe. However, Donald Trump, who, on the one hand, would be happy to impose duties on the European Union and declare a second trade war, understands that in the current conditions this is not beneficial either to America or to himself. The fact is that the trade war with China, despite the assurances of the Chinese and American sides about "progress in the negotiations," is far from over. Now we are only talking about signing the agreement in the first phase. That is, at least, there will be several such phases, and no one knows how long these negotiations will last. For example, it took seven years to conclude a free trade agreement between the EU and Canada. Trump can't wait that long. Presidential elections will be held in a year, in which Trump is going to win. His ratings now, although they remain high, are still declining. According to preliminary information and research, Trump would now lose the election to any of the candidates from the Democratic Party. Not least because the electorate is unhappy with the trade war with China, which has made cheaper Chinese goods in America more expensive. Thus, Trump needs to end the war, and not to the detriment of himself and the United States. China understands why Trump is in a hurry and what he is striving for, as such he now plans to squeeze everything out of this agreement. In such circumstances, to ignite a second trade war (after all, the EU will respond with mirror duties on American imports with a probability of 100%) is simply inexpedient. Donald Trump's chances of winning the election will fall to zero if he manages to fall out with the EU as well.
However, all this remains only the lyrics in the given conditions. That Trump is not going to fuel a new trade conflict is good. Good for the global economy, and for the EU economy, and for the economy of the United States. However, this news is neither news nor an event for the euro/dollar pair. Just the most negative scenario has been postponed for six months. It can be realized in six months, or it can never be realized. The currency pair is still continuing a downward movement, so the US dollar is quietly rising in price without such loud news. Traders continue to support the US currency for reasons that we have repeatedly mentioned and the main one of which is the imbalance between the key rates of the ECB and the Fed that persists in favor of the US economy. Thus, we believe that only around the previous local lows can we expect a reversal of the euro/dollar pair upwards, since there are also few reasons to update these lows now. In the long run, a pair can go into a wide flat.
Trading recommendations:
The EUR/USD pair completed the correction and resumed the downward trend. Thus, it is now recommended to re-sell the currency pair while aiming for first support level of 1.0966. A new upward turn of the MACD indicator may indicate a new round of correction. It is recommended to return to purchases of the euro currency no earlier than when the bulls break the critical Kijun-sen line, which is not expected in the near future.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicator window.
Support / Resistance Classic Levels:
Red and gray dotted lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movement options:
Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com