4-hour timeframe
Amplitude of the last 5 days (high-low): 27p - 36p - 25p - 39p - 42p.
Average volatility over the past 5 days: 34p (low).
The EUR/USD currency pair spent the first trading day of the new week in quiet trading with the same low volatility that the pair has been pursuing in recent weeks. Only in the middle of the US trading session did we receive a more or less serious movement, an upward movement, which fully corresponds to the scenario that we already described at the end of last week and which provides for the euro's corrective upward movement based on purely technical factors. We still believe that the paradoxical situation in which the euro/dollar pair found itself did not allow it to continue the downward trend, which, from a fundamental point of view, was much more logical. At the moment, the pair has worked out the resistance level of 1.1076 and will try to gain a foothold above it in order to continue its daily 30-point upward movement.
The calendar of macroeconomic events of today did not contain a single publication. Several representatives of the European Central Bank made speeches during the day, but it is hard to imagine that the movement seen at the US trading session is a reaction to these statements. At least, if traders paid attention to these speeches, then they are unlikely to be very impressed. The Bank of Slovenia Chairman Bostjan Vasle said today that growth in the eurozone has stabilized, that the package of measures taken by the central bank at the penultimate meeting has an impact on the economy in line with the expectations of the ECB Monetary Committee. Vasle also said what we mentioned earlier: in order to fully appreciate the effect of the measures taken by the regulator, it may take much more time than two months. And recall, the new stage of the quantitative incentive program began to take effect, and it was on November 1, not even a month has passed since it functions. At the same time, we personally do not see any particular signs of a recovery in the EU economy or a slowdown in the fall of economic indicators. It should be understood that any senior official can rarely openly declare that the economy will continue to slow down. Why once again excite the markets and put them in a state of panic? Indeed, such words can not only cause panic in the foreign exchange market, they can reduce the influx of investments in EU countries, adversely affect retail sales, personal expenses of EU residents, who will save money "under the pillow" in case of crisis. But the opposite statements from the heads of central banks just have a logical basis. For example, to assure and convince markets and individual market entities that "the situation is under control" and "there is nothing that the central bank could not cope with." In principle, these are exactly the words we heard today from Vasle. He also added that in the first half of 2020, weak growth in industry can continue, while in the services and labor markets the situation is much better. However, how can one not recall the words of Mario Draghi at one of his last speeches as the ECB head that a recession in industry could pull other sectors of the economy. At the end of his speech, Vasle noted that the central bank's September decision is working, and if the situation worsens, "there is still room for progress." Any trader saw a hint in this message that the central bank is ready to lower rates further, since this is the most effective tool for influencing the economy. And, from our point of view, it will be necessary to act in the near future, since inflation, with the current rate of impact of the ECB, may soon "go under water" ...
Well, and how not to note the fact that even though Vasle's speech was dovish, if you look closely, traders still saw in it or wanted to see positive notes. Thus, the euro continues to continue weak correctional growth in the upper line of the Ichimoku cloud, which is a strong resistance. Also, resistance levels of 1.1101 and 1.1104 now lie near this line, which traders also have to overcome if they want to continue to buy the euro. We can say that it is around the level of 1.1100 that the euro/dollar pair's fate for the next few days will be decided.
Almost the only factor that can now provide indirect support to the euro is another "dead end" in the negotiations between China and the United States. Here, everything, as in the Brexit process, all the negotiators assure that there is progress, but in fact the United States refuse to satisfy the ultimatum of China on the abolition of duties already introduced and the refusal to introduce the December package of duties, China refuses to buy agricultural products from the United States for a strictly fixed amount each year. That's all progress ... Although the US dollar usually paid little attention to negotiation difficulties, it can now respond to them with very weak volatility.
Trading recommendations:
EUR/USD continues to move up. Thus, now it is possible to consider purchases of the euro, but only in small lots, since the current movement is still identified as corrective. We recommend to wait for purchases until the 1,1101 level is overcome. It is recommended to return to purchasing the US currency no earlier than the reconsolidation of the euro/dollar pair below the Kijun-sen critical line with a target of the support level of 1,1008.
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