4-hour timeframe
Technical data:
The upper channel of linear regression: direction – sideways.
The lower channel of linear regression: direction – upward.
The moving average (20; smoothed) - sideways.
CCI: -51.6646
The second trading day of the week ended quite unexpectedly with a significant drop in the European currency. Yesterday, we already said that the euro did not have any factors of decline as such, and the main reason was called the general economic condition of the States and the EU (in favor of the States), as well as technical factors (in favor of a new downward trend). Of course, in the forex market, everything can change in a matter of hours. That is, it is impossible to say with 100% certainty that the way for the pair is only one – down. However, we believe that this is the most likely scenario. Volatility rose slightly.
On Wednesday, November 6, all macroeconomic reports will be published in the European Union. This is not to say that they carry an increased degree of importance, but recently both traders and heads of central banks like to pay attention to business activity. Thus, business activity in the services sectors of the eurozone countries is very interesting data that can affect the course of trading. In addition to the services sector, composite indices of business activity (the arithmetic mean between the sphere of production and services) will also be published. As we have said many times, a value above 50 is considered positive. According to experts, all five indices published today will be above this critical value. There seems to be no cause for concern, but business activity may continue to slow down (this is not yet indicative of downturns in services), which may be perceived negatively by traders. A little later, data on retail sales in the European Union will be published. It is also a secondary indicator that should not be overlooked. There may not be any reaction to it (especially if forecasts are exceeded), but a weak value can serve as an impetus for new sales of the euro/dollar pair.
Separately, we can discuss the topic of ongoing trade negotiations between China and the United States. According to the latest information, Beijing and Washington may conclude a "first phase" trade deal as early as this month. However, what conditions will be spelled out in this agreement is not reported. What concessions will be made by both sides? All according to the same information, China wants the abolition of as many duties on its goods as possible in the framework of the conclusion of the "first phase". What will Trump answer to this? So far, both sides have only announced "good" progress in the negotiations, but there are no details. Moreover, the US dollar has always reacted rather weakly to any messages related to the escalation or de-escalation of the trade conflict with Beijing. That is, yes, this is extremely important news that is directly reflected in the macroeconomic indicators of China and America. However, traders work out precisely the worsening statistics from these countries, and not the very fact of a breakthrough in the negotiations or a failure. Thus, even if the parties sign the agreement in November, this will not affect the chart of the euro/dollar currency pair. But when the positive effects of this signing are received, then it will be possible to count on an increase in indicators in the USA and, accordingly, demand for the American currency may increase significantly. We have already said that the euro can show growth now only on negative data from overseas. If the trade conflict between the States and China ends, this will inevitably lead to economic growth, respectively, the euro can become cheaper even more than now. Regarding the likelihood of a trade agreement, we believe that the parties will agree. Trump needs this, which means he will do his utmost to agree until the moment when his defeat in the 2020 elections can be publicly announced.
From a technical point of view, the trend is now downward. Accordingly, short positions are more preferable. None of the channels of linear regression is directed downwards, but the bears show their strength and readiness to move downwards again.
Nearest support levels:
S1 – 1.1108
S2 – 1.1047
S3 – 1.0986
Nearest resistance levels:
R1 – 1.1169
R2 – 1.1230
R3 – 1.1292
Trading recommendations:
The euro/dollar pair overcame the moving, the Murray level of "6/8" is also overcome. Thus, it is now recommended to trade lower with the nearest target of 1.1047. If it is overcome, it will be possible to buy the dollar with the target of 1.0986. It is not recommended to return to purchases now, for this purpose there are neither fundamental nor technical bases.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustrations:
The upper channel of linear regression – the blue line of the unidirectional movement.
The lower channel of linear regression – the purple line of the unidirectional movement.
CCI – the blue line in the indicator window.
The moving average (20; smoothed) – the blue line on the price chart.
Support and resistance – red horizontal lines.
Heiken Ashi – an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com