4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -56.9734
The EUR/USD currency pair starts Friday, May 8, in a corrective movement that started last night. We have repeatedly warned that on the approach to the area of 1.0750-1.0740 or when working out this area directly, the euro/dollar pair may turn up, since here lies the lower border of the side channel, in which the pair has been consolidating in recent weeks. In practice, it turned out that the quotes worked out the minimum of April 6 – 1.0768 and rebounded from it. Thus, so far, the current movement is identified as a correction, but the probability of overcoming the moving and moving to the Murray level of "2/8"-1.0986 is extremely high.
The "coronavirus" epidemic, if it has stopped gaining momentum, has definitely not gone anywhere. Yes, the rate of infection growth has fallen, and the death rate from the "Chinese disease" has also decreased. However, this does not mean that you can now breathe freely. According to the latest research by scientists, the virus does not tolerate sunlight and high temperature. Therefore, in the summer and hot months, it can spread very reluctantly. However, with the arrival of a colder season, it can become active again. There are medications to treat the COVID-2019 virus, but there are no specialized ones. Vaccines have also not yet been invented. This means that at any moment, the whole world or any single country can be covered by a new wave of the epidemic. Especially now, when many countries have begun to relax quarantine measures. We certainly hope that nothing like this will happen. This is in the interests of all humanity. But to rule out such a scenario would be foolish. Recent publications of forecasts from the IMF, ECB, Fed, and other international organizations, rating agencies, financial conglomerates, and banking syndicates, all predict the economies of the UK, the US, and the European Union to fall heavily. In the European Union, we are talking about a minimum of 7.7% in 2020, and in the United States, it may exceed 5%. If the United States does not have problems with financing the economy, small and medium-sized businesses, as well as providing assistance to the American population, all aid packages are accepted and approved by Congress and the Fed, then in Europe, everything is not so simple. The other day, we already mentioned that the German court's ruling casts doubt on the legality of the ECB's actions to buy bonds as part of the economic stimulus program over the past 5 years. However, now, in times of epidemic and crisis, the ECB is conducting several more programs to buy securities through the central banks of all EU member states. So the German court decided to explain the legality of such actions by the ECB within three months. However, officials of the European Central Bank have already said that the ECB does not obey the German court, and there is no ruling of the European court, and it is unknown whether it will. Thus, it is not a fact that this story will get any continuation, and the ECB will be prohibited from conducting similar programs in the future. The main claim of the Germans is that the repurchase of securities of various countries is disproportionate and is aimed at direct financing of debts, which seems to be prohibited by European law.
However, in addition, some EU officials believe that the Alliance itself may not survive the "coronavirus" epidemic. Former President of the European Council Donald Tusk in an interview with the German newspaper Der Spiegel said: "We have never faced such a challenge as now, with a pandemic. If we look at southern Europe, we are talking about a disaster. Here everything depends on quick help, as well as on sympathy and solidarity." According to Tusk, Italy, Spain, Portugal, and Greece were completely unprepared for a new crisis and epidemic, because of them, the European Union suffered huge reputational losses. Now it is up to Brussels to pull these countries from the bottom. However, the ECB, the European Parliament, and the European Council are not charitable organizations that can print money in any amount and distribute it left and right. These organizations are backed by the same member states of the European Union. Thus, in fact, more financially stable countries like Finland or Germany will have to pay the bills of Italy, Spain, Greece, and Portugal. Naturally, this approach to solving the problems of the "southern countries" does not suit the "northerners" themselves. "The one who has more should also give more. This is the principle of solidarity. Germany is financially strong and can protect its industry and its companies. Other EU countries do not have this opportunity," says Donald Tusk. The option with "coronabonds" has failed at the moment, since the European Council failed to agree on the issue of securities on behalf of the entire EU for the purpose of their further placement on debt markets.
French President Emmanuel Macron holds a similar opinion. He also speaks of solidarity on the part of the Nordic countries (Germany and the Netherlands) in helping the countries most affected by the epidemic. Macron believes that if the aid is not provided, the entire European Union will be at risk of collapse. "If Germany and other financially stable EU countries refuse to support those most affected by the pandemic, it will help to win the populists in Italy, Spain, and France, as well as in other countries that will not receive assistance from the EU in times of crisis," the French President said. "I think that the EU is a political project. We need to provide financial assistance and show solidarity in order for Europe to remain united. In the more affluent European countries have a great responsibility," Macron concluded. Thus, the question now in Europe is the most simple: the Netherlands, Finland, Germany, and others must either pull out the most affected countries at their own expense, or the EU may come to an end.
Quite important macroeconomic publications are again scheduled for the last trading day of the week. This time it's all in the United States. Today we will know the official unemployment rate for April, which may rise to 14%. The number of new jobs created outside the agricultural sector (NonFarm Payrolls) – may decrease by 22 million, as well as the average hourly wage with a forecast of +3.3%. It should be noted at once that the latter indicator does not have any special significance at the moment. Nonfarm Payrolls will almost repeat previous reports on unemployment benefit claims and ADP, so it may not arouse any interest from market participants. The unemployment rate of 14% is too optimistic, according to the latest estimates of the number of Americans who applied for benefits. Thus, these reports with very "loud" signs are unlikely to interest traders in practice. For example, yesterday an important report on applications for unemployment benefits was ignored – the dollar continued to grow. The day before yesterday, an important ADP report was ignored – the dollar continued to grow.
The average volatility of the Euro/dollar currency pair as of May 8 is 79 points. Thus, the indicator has decreased slightly and now its value is characterized as "average". Today, we expect quotes to move between the levels of 1.0750 and 1.0908. A downward turn of the Heiken Ashi indicator may signal the end of the upward correction cycle.
Nearest support levels:
S1 – 1.0742
S2 – 1.0620
S3 – 1.0498
Nearest resistance levels:
R1 – 1.0864
R2 – 1.0986
R3 – 1.1108
Trading recommendations:
The EUR/USD pair started to adjust. Thus, sales of the pair with targets in the area of 1.0750-1.0740 remain relevant now, if there is a rebound from the moving average line. It is recommended to consider buying the euro/dollar pair not before the price is re-anchored above the moving average line with the goals of 1.0908 and 1.0986.
Explanation of the illustrations:
The highest linear regression channel is the blue unidirectional lines.
The lowest linear regression channel is the purple unidirectional lines.
CCI - blue line in the indicator window.
Moving average (20; smoothed) - blue line on the price chart.
Murray levels - multi-colored horizontal stripes.
Heiken Ashi is 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