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EUR/USD. Results of the week. Italy is going to accept 209 billion euros of aid and leave the European Union following the

4-hour timeframe


Another trading week ends on the currency market, and we summarize its results. First, consider the euro/dollar pair, which continues to trade higher, ignoring a huge number of fundamental and macroeconomic events. During the last trading day of the week, the upward movement did not continue, however, the downward correction did not begin. The pair just stood in one place for most of the trading day. Buyers do not see any new reasons for new purchases of the euro currency, and sellers continue to rest outside the market, so there is no one to help the US currency now. Throughout the week, no important macroeconomic reports were published in the United States or the European Union. We remind traders that since the coronavirus pandemic began in the world, markets have ignored all statistics. And this is even quite understandable, since it is not surprising that the economies of all countries of the world are simultaneously shrinking, and all the macroeconomic indicators have collapsed. Thus, traders are not interested in macroeconomic data in a state of "coronavirus crisis", however, they can not be ignored, since it is by them that we can judge the scale and speed of recovery of a particular economy.

On Friday, July 24, several reports were finally published in the European Union. First, Germany and France released business activity indices for July for services and manufacturing, and then similar indices for the entire European Union. 8 out of 9 business activity indices exceeded the forecast values. The reaction of traders to these reports was eloquent – the euro remained in place. In the afternoon, similar indices were published in the United States and also did not cause any special reaction. Thus, we once again draw the attention of market participants to the fact that statistics now play an extremely insignificant role. What is important is the fundamental background and fundamental events. However, here, too, it all comes down to a few factors. We believe that the US dollar continues to fall in price against both the euro and the pound solely because of the events that are happening in the US now. We have repeatedly said that these are four crises at once (from our point of view) and the main factor pushing the dollar down is the "coronavirus" epidemic, for which anti-records are set almost daily. In short, now in America, 60-80 thousand new cases of the disease are registered every day. Over the past three days, more than 1,000 deaths from the virus have been recorded in the country. At the same time, the head of state, Donald Trump, continues to do nothing. It does not declare a state of emergency, it does not announce a new quarantine, it does not call on Americans to follow security rules, to distance themselves socially and to wear masks. For the first time in a long time, the head of the White House held a briefing on "coronavirus" and immediately stunned listeners and viewers with the phrase that "before the situation improves, it will probably get much worse". Many experts immediately asked the question, where is even worse? Moreover, if the situation is getting worse, why isn't the US government taking any drastic action? The answers to these questions remain shrouded in gloom, and Trump seems to continue to consider the "coronavirus" a runny nose. Well, while COVID-2019 continues to spread across the United States, investors and traders are afraid to buy the US currency, fearing both for its prospects and the prospects of the US economy as a whole. After all, it is no secret that the epidemic can not pass without a trace, even if the quarantine or "lockdown" in the country is not declared.

Meanwhile, the European Union has begun to mature and a bad fundamental background. At the beginning of the trading week, markets were filled with optimism about the EU summit, at which all 27 participating countries agreed on both a 750 billion recovery fund and a budget for 2021-2027. However, on Thursday it became known that the European Parliament is dissatisfied with the current agreements and is not ready to approve both documents. The European Parliament, led by David Sassoli, believes that funding for many programs has been cut, and the entire budget is too small. Thus, Sassoli believes that negotiations with the European Commission and the European Council are now necessary to make a final decision, however, certain adjustments to the budget will still have to be made. The same applies to the recovery fund. Sassoli believes that the principle of "rule of law" is not well observed by Hungary and Poland, which are the beneficiaries of large sums, according to the current distribution plan of the recovery fund.

Well, the most interesting information came on Friday, when it became known that the ItalExit party was being created in Italy. The party, which will be led by former TV presenter Gian-Luigi Paragone, will seek the country's exit from the European Union. In other words, the situation is as follows: at first, Italy receives about 200 billion euros from the EU, of which more than half is free aid, and later it can freely leave the European Union if the majority of Italians voted for the ItalExit party in the next election. And Italians can vote this way because "anti-European" sentiments have been maturing in this country for a long time. "The EU and the euro were imposed on us from above," Paragone says. "They damage the real economy, families and employees, and small and medium-sized businesses." The former TV host also believes that Italy needs to return to its national currency – the lira. Paragone believes that the euro was introduced to satisfy German interests. Experts, however, believe that the prospects for this process and the "ItalExit" party are still unclear. According to recent opinion polls, about 58% of Italians support the euro currency. But only 39% of Italians support the EU itself. However, in April, they were even less – only 27%. At the same time, more than 2/3 of Italians are not ready to vote for leaving the EU. Thus, if 209 billion in aid to Italy will be provided, the eurosceptics in the country may significantly decrease, but no one knows what will happen by 2023 when the country will hold the next parliamentary elections.

In the current situation, we believe that the European currency has long since exhausted its growth potential. However, everything will depend on market participants, and especially on large traders. So far, there is no technical reason to say that the upward trend is complete, and the US dollar can be under massive pressure due to the "coronavirus" for as long as you want. Thus, we still recommend sticking to the trend and not trying to guess the pair's reversal down. However, the fact that there is no optimistic news coming from the Eurozone itself warns that the euro could also start to weaken at any moment.

Recommendations for EUR/USD:

For long positions:

In the 4-hour timeframe, the EUR/USD pair calmly continues its upward movement. Thus, the target for buy orders now remains only the volatility level of 1.1688, all other targets were worked out and overcome during the week.

For short positions:

Sell orders can be opened no earlier than when the price is fixed below the critical line with the first goal being the Senkou Span B line (1.1362). However, this option is not expected to be implemented in the near future – the pair continues its steady upward movement.

The material has been provided by InstaForex Company -