4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -6.9946
The EUR/USD currency pair has been actively adjusted in the last few trading days of the week. However, even though the correction has been going on for three days, it still cannot be called strong or even noticeable. The previous correction movement up was almost 650 points, and the correction itself at the moment – 200. So far, the euro/dollar pair has not even reached the classic 38.2% Fibonacci correction level. The first trading day of the week was spent in absolutely calm trading. No macroeconomic statistics were published on this day either in the United States or in the European Union. However, the only report that was published on Friday in the EU, on industrial production, also did not significantly affect the mood of market participants. However, by the end of the day, the euro currency still climbed up again. For two weeks, the US dollar has been falling almost non-stop, and we still cannot state with a high degree of accuracy the reasons for this fall. A correction is currently underway, but will the upward trend resume when it is completed? Traders (both large and small) now seem to ignore not only macroeconomic statistics in general but everything that is happening in Europe. Recall that recently several high-ranking officials of the ECB, the European Parliament, and the European Commission stated that the economy will suffer serious damage by the end of 2020, while the official forecast is minus 8.4% of GDP. Naturally, almost all macroeconomic indicators in the EU continue to fall and shrink. But the same pattern is observed in the United States. We can even say that the situation in the US and the EU is approximately the same now. But only economic matters. From our point of view, America is mired in a serious political crisis that will not end in resignation, impeachment, or re-election, and the culprit of this crisis is only one person - Donald Trump. We have repeatedly written and talked about the "merits" of Trump and why this man is not suitable for the role of the leader of the nation. More and more media outlets and independent experts are beginning to hold the same opinion. Moreover, more and more world experts and analysts are also beginning to adhere to the opinion that Trump himself is doing everything to avoid being re-elected for a second term. The actions of the US President in 2020 raise so many questions that even not all members of his Republican party are ready to support Trump in future elections. So now the United States is in a position of uncertainty. In a position where it is unclear what will happen next with the country, how long and how hard it will recover from the "coronavirus crisis" and when this crisis itself will end at all? The fact that the first person in the United States removed the "lockdown" is good for the economy, but in recent weeks, the country has recorded a strong increase in cases of COVID-2019. Thus, the United States in principle can do without the second wave of the epidemic, since they did not cope even with the first. Well, it is hardly necessary to say that the longer the virus persists, the longer the economy will stall. Not all Americans are willing to risk their health and live a full life during the epidemic. This means that the economy will not be able to recover quickly and fully before the drug against COVID-2019 is invented. Thus, the US dollar may have become cheaper for a reason in recent weeks. Perhaps it's all the fault of Donald Trump, who very much wanted the US dollar to cost less in the foreign exchange market. In general, if in the next week or two the euro/dollar pair manages to return to its original positions (around the level of 1.0900), then we can talk about stabilization of the situation. If not, and the upward trend continues to form, then it will be possible to panic all adherents to buy the US dollar at any time and under any circumstances. Also, we should not forget that despite the recovery of the stock market in the US, there are a lot of other factors that affect the American economy. For example, government debts that have recently grown to $ 26 trillion and need to be serviced. And one of the main creditors of the United States is China, which Washington has been at war with in recent years...
At the same time, the European Union is considering whether to appeal to the International Court of Justice in the Hague with a formal lawsuit against China for its desire to adopt a law on "national security in Hong Kong". This week, the European Parliament will vote on whether to take this issue to court. The EU notes that China's decision to adopt this law violates not only the Sino-British agreement but also the international covenant on civil and political rights. Earlier, Washington threatened Beijing with new sanctions and depriving Hong Kong of all trade preferences, which is expected to make the district a normal part of China from one of the largest financial centers in the world, which will immediately fall under all US duties and sanctions that are already in effect. Also, the official London expressed its claims, which threatened China with issuing British citizenship and permission to live and work in the UK to all residents of Hong Kong who wish to do so. Beijing has already asked the United States and Britain not to interfere in China's internal affairs, but a new political and geopolitical conflict is brewing.
On the second trading day of the week in the United States and the European Union, only minor reports are planned, which are unlikely to greatly interest traders and cause a serious market reaction. First, the German consumer price index for May will be published, which is projected at 0.5% y/y. Later, more formal and statistical data will be available on the ZEW Institute's business sentiment index for Germany, the ZEW current economic conditions assessment index for Germany, and the EU economic sentiment index. Recall that these indicators reflect only the mood of investors. In the United States today, retail sales for May are scheduled to be published with a forecast of +8%, as well as industrial production with a forecast of +3%. However, more important will be the speech of the head of the Federal Reserve, Jerome Powell, in the US Congress. Recall that Powell recently again mercilessly criticized by Donald Trump for refusing to continue to reduce rates, as well as for too low forecasts of the state of the economy in 2020-2022. Powell also called on Congress to provide more financial assistance to the American economy. Therefore, his speech is almost guaranteed to give traders new food for thought.
The average volatility of the euro/dollar currency pair as of June 16 is 119 points. Thus, the value of the indicator is still characterized as "high", thanks to the last trading days. We expect the pair to move between the levels of 1.1196 and 1.1434 today. A reversal of the Heiken Ashi indicator back down will signal a possible resumption of the downward movement.
Nearest support levels:
S1 – 1.1230
S2 – 1.1108
S3 – 1.0986
Nearest resistance levels:
R1 – 1.1353
R2 – 1.1475
R3 – 1.1597
Trading recommendations:
The EUR/USD pair returned to the area above the moving average line. Thus, at this time, long positions with the goals of 1.1434 and 1.1475 are again relevant before the Heiken Ashi indicator turns down. It is recommended to return to selling the pair not before fixing the price below the moving average with the first goal of the Murray level "3/8"-1.1108.
The material has been provided by InstaForex Company - www.instaforex.com