4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - sideways
Moving average (20; smoothed) - downward.
CCI: -44.1948
On Wednesday, August 11, the EUR/USD currency pair fell to the Murray level of "0/8"-1.1719 and even slightly lower to the level of 1.1700, which we have repeatedly called as the target for the second round of the corrective movement within the global upward trend. So far, the upward pullback from this level is minimal and provoked exclusively by the US inflation report published yesterday. However, as usual, there was no strong movement. Thus, so far, we have only a relatively weak upward correction, and the downward trend remains down as the price continues to be located below the moving average line. As we have said more than once, we expect the beginning of a new powerful upward trend, within which the pair will grow to at least the 22nd level. However, the global downward correction continues in the last few months, and the movements themselves have become much weaker. Thus, any movement of the pair needs two times more than before. Hence, there is some delay in the implementation of absolutely any scenario. In the same week, the macroeconomic background, which was simply absent in the first two trading days, also worked not in favor of traders. Thus, the markets did not even have anything to react to. Thus, the movements were minimal. But in general, this situation is still abnormal even for the euro/dollar pair. The current movement is too weak. Thus, we are waiting for an increase in volatility and the beginning of a new upward trend.
From our point of view, all the factors that have influenced the euro/dollar pair in recent months remain in force. The markets have become more confident that the Fed will start curtailing the quantitative stimulus program earlier than expected in the last week or two. Perhaps even as early as 2021. Therefore, the US dollar unexpectedly received quite significant support. However, the euro/dollar pair, thanks to this fundamental background, still could not go far down. Now the Fed is just getting ready to start talking about this. In addition, the regulator will continue to monitor inflation and the labor market closely. In the last two months, the labor market has recovered very well and has grown by about 1.8 million jobs, according to a report by Nonfarm Payrolls. But this does not mean that next month the indicator will not fall to 200-300 thousand per month. Thus, for the time being, only those conclusions that are most obvious should be drawn: the labor market has been recovering rapidly in the last two months, and no one knows what will happen next. From our point of view, it is only due to the growth factor of faith in the curtailment of the QE program in 2021 that the US dollar owes its growth in recent weeks. However, nevertheless, it cannot constantly grow on expectations alone.
Recall that there are now enough controversial issues in the States that require their resolution. Although the economy continues to grow and the labor market continues to recover, these are all artificial processes. For example, the stock market has been growing steadily over the past year and a half, when the total levels of production and consumption have decreased around the world. How does this happen? Consumption is falling, savings are growing, production is falling, business activity is weak, but at the same time, companies are becoming more expensive. Everything is simple. There is more money in the economy, which is why the stock market is growing. Accordingly, the economy is also increasing because there is more money. However, along with this growth, the US national debt also increases, which already amounts to $ 28.5 trillion. Once again, the US Treasury is faced with the problem of reaching the national debt limit, which now needs to be either increased or recognized as a "technical default." However, this does not stop politicians in the United States from new monetary injections into the economy. For example, just a few days ago, the US Senate adopted an "infrastructure" package that involves spending $ 1 trillion over the next ten years on improving roads, introducing satellite Internet, and repairing infrastructure facilities. It seems to be assumed that increased taxes will finance this project. However, it recently became clear that Joe Biden's initial proposals for raising taxes for large corporations and the American rich will not be implemented. At least in this package. For what reasons – it is unknown. No sooner had the legislators adopted the first economic development package than the second ("social"), which is already looming in the queue for $ 3.5 trillion. At the same time, we can say that they have already voted on it in the Senate. To be more precise, it is not for the bill itself but its budget resolution. All Democrats voted "for," all Republicans – "against." However, this still means that the Democrats managed to approve the resolution since they always have the vote of the country's vice president Kamala Harris in reserve. This package will be aimed at creating jobs, fighting climate change, and helping American families. Since the budget resolution was adopted, the Democrats were protected from various bureaucratic delays that the Republicans could use to block the bill's implementation. Now the bill itself can be adopted in the same way by a simple majority. It is also reported that this project should also be financed by raising taxes for large companies and be invested in the economy over the next ten years. In general, everything looks great on paper, and, most likely, the Democrats will be able to adopt both economic development packages, totaling more than $ 4 trillion.
The volatility of the euro/dollar currency pair as of August 12 is 46 points and is characterized as "low." Thus, we expect the pair to move today between the levels of 1.1694 and 1.1786. The reversal of the Heiken Ashi indicator downwards signals the resumption of the downward movement.
Nearest support levels:
S1 – 1.1719
S2 – 1.1658
S3 – 1.1597
Nearest resistance levels:
R1 – 1.1780
R2 – 1.1841
R3 – 1.1902
Trading recommendations:
The EUR/USD pair has started a round of corrective movement. Thus, today, we should consider new short positions with targets of 1.1694 and 1.1658 in the case of a downward reversal of the Heiken Ashi indicator. Purchases of the pair will be possible if the pair is fixed above the moving average line with a target of 1.1841 before the Heiken Ashi indicator turns down.
The material has been provided by InstaForex Company - www.instaforex.com