4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
The EUR/USD currency pair starts a new week with the status of an adjusting pair. However, the correction is so weak at the moment that it can only be called a "pullback." However, the whole movement shown by the pair can hardly be called strong. But at the same time, the US dollar has been getting more expensive for a month and has managed to grow by 300 points during this time. 300 points in a month are not much, considering that the movement was almost recoilless. Thus, the question of volatility, which remains at a low level, arises again and again. As for the technical picture, now there is no question at all about what the trend is. Both linear regression channels are directed downwards, as is the moving average line, and last week the bears overcame the important level of 1.1700, near which they have been trampling for a long time. Thus, the pair may continue to move down, especially if the markets keep in mind the possible curtailment of the QE program in November. Recall that, from our point of view, QE is the main reason for the growth of the dollar. Or rather, its very likely completion in the near future. Thus, it is not recommended to consider purchases until the price is fixed above the moving average line.
Meanwhile, the States are increasingly facing the problem of the national debt limit. Janet Yellen has been regularly calling Congress to suspend the limit or raise it over the past few months. Otherwise, her department will not be able to make all the necessary payments. It would be strange in this situation not to know the opinion of President Joe Biden. That's what American journalists did on Saturday. Joe Biden told them that he hoped for the agreement of Republican senators on this issue. He also expressed hope that Republicans in the Senate will show responsibility and consider the situation's urgency. He also advised senators not to try to "seize the podium" or delay decision-making by delaying the debate. Recall that the House of Representatives agreed to suspend the debt limit until December 16, 2022. However, now the bill must be supported by senators. Although, as we said earlier, there should not be a special problem, given that there are 50 Democratic senators and the same number of Republican senators, and the key vote belongs to Kamala Harris, Joe Biden's vice president. We also believe that it makes no sense for Republicans to reject this bill, since in this case, the discontent of the American people may be directed at them. For it is the American people who will stop receiving aid, pensions, and benefits. In addition, the financing of some state structures and institutions may stop, and Republicans will be "to blame" for all this in the eyes of the people, who have already lost several positions in the ratings and lost the last election. Nevertheless, the American media are afraid that the bill may still be blocked.
However, the Republicans' position on this issue is quite tough. They demand Biden and the Democrats that they cut spending and start taking at least some measures to reduce the national debt, which has been growing "by leaps and bounds" in recent years. So far, this topic is unlikely to impact the dollar, which has been strengthening against the euro in recent weeks. Traders do not believe that the Senate will not be able to pass this bill. And in any case, Donald Trump has accustomed Americans to "shutdowns." Thus, the markets are not too worried about this yet. In any case, in the coming week, everything will become clear and understandable.
Therefore, there are no openly important events planned for the dollar that can radically change the fundamental global background in the coming weeks. The question now is, by and large, quite simple: when will the markets stop buying the dollar only on expectations of curtailing a huge quantitative stimulus program? However, practice shows that it is precisely such slow, progressive movements that are the longest. From a global perspective, we believe that the current movement is just a much-delayed correction. But in any case, there are no grounds for buying the euro/dollar pair now. Therefore, we should expect a change in the fundamental background or saturation of the bears.
This week, only one report can quite strongly affect the long-term mood of traders. This report is NonFarm Payrolls – but it will be released only on Friday, so until that time, the pair can continue calm movements and may even stop falling. Note that the CCI indicator has already entered the oversold area twice (below the -250 level), which signals a possible upward reversal of the pair.
The volatility of the euro/dollar currency pair as of October 3 is 52 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.1545 and 1.1649. The reversal of the Heiken Ashi indicator back down will signal the resumption of the downward movement.
Nearest support levels:
S1 – 1.1536
S2 – 1.1475
S3 – 1.1414
Nearest resistance levels:
R1 – 1.1597
R2 – 1.1658
R3 – 1.1719
Trading recommendations:
The EUR/USD pair started a weak correction on Friday. Thus, today, we should consider new options for opening short positions with targets of 1.1545 and 1.1536 after the reversal of the Heiken Ashi indicator down. Purchases of the pair should be opened if the price is fixed above the moving average line with targets of 1.1719 and 1.1780. They should be kept open until the Heiken Ashi indicator turns down.
The material has been provided by InstaForex Company - www.instaforex.com