4-hour timeframe
Technical data:
The upper channel of linear regression: direction – up.
The lower channel of linear regression: direction – down.
The moving average (20; smoothed) – down.
CCI: -97.3833
Yesterday, the EUR/USD currency pair ended again in a downward movement. Thus, the downward trend continues, the bears continue to hold the market in their hands, and the US currency does not need fundamental factors to continue to be in demand. At least in the first two trading days of the week, no important macroeconomic report was published in the European Union and the United States. So, what to expect from a currency pair? If you look purely at the technique, the continuation of the movement down to two-year lows, from which the bulls with great difficulty took the euro/dollar pair. However, after two days of outright calm, traders will finally begin to receive macroeconomic data and, I must say, quite important data.
Everything will begin with the publication of the consumer price index in Germany for October. This time, the final value. Experts' expectations are reduced to the figure of +1.1% y/y. Is it worth saying once again that inflation in Germany is interesting in itself, but is more considered to predict the future of the European inflation rate? Accordingly, its decline with a probability of 80-90% will result in a slowdown in EU inflation, which can lead to another fall in the European currency. Next, the European Union will publish an indicator of industrial production for September. There is nothing optimistic to expect. The best thing that can happen with the volume of industrial production – they will decrease a little less than experts expect (-2.3% y/y and -0.3% m/m). In the States, the consumer price index for October will also be published today and options are possible. The core inflation rate is expected to reach +1.7% y/y and in monthly terms – + 0.3%. Thus, although it is lower by 0.3% y/y than the target of the Fed (and the ECB too), nevertheless, American inflation is close to it, unlike the European one. Since the Fed has already lowered the rate three times, inflation at the end of October may remain unchanged. It will be neither bullish nor bearish. But the slowdown in inflation in the United States can stop the fall of the euro/dollar currency pair. The most interesting events are left for the evening.
Today, Jerome Powell will speak in the US Congress before the Joint Economic Committee. According to many experts, three US monetary easing was enough for the US economy to stop showing signs of a slowdown. Thus, Jerome Powell, with a high probability, will declare the "good" state of monetary policy and the economy, however, he cannot but mention the risks that are listed at each of his speeches. Of course, the head of the Fed should express the hope that the US-China trade conflict will end as soon as possible. Thus, no one expects the "dovish" rhetoric from Jerome Powell. Accordingly, the US dollar is unlikely to fall under market pressure after his speech. And if so, then the only event of the day after which the fall of the euro currency may stop is the report on inflation in the United States if traders see figures below +1.7% y/y.
From a technical point of view, all indicators indicate the continuation of the downward trend. Not a single factor speaks in favor of the growth of the euro. We have repeatedly said that the main hopes for strengthening the euro are associated with negative economic data from overseas. So, if today's statistics from the United States disappoint, the euro will have a chance for a small increase. However, both German inflation and European industrial production mustn't fail. And production in Europe will fail with almost 100% probability.
Nearest support levels:
S1 – 1.0986
S2 – 1.0925
S3 – 1.0864
Nearest resistance levels:
R1 – 1.1047
R2 – 1.1108
R3 – 1.1169
Trading recommendations:
The euro/dollar resumed its downward movement. Thus, it is now recommended to sell the euro again with the target of the Murray level of "4/8" - 1.0986. Volatility at this time remains low, but today it can gro. Purchases of the pair are now impractical since there are no fundamental or technical reasons for this.
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 – the 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