Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: -127.5701
The EUR/USD currency pair on Tuesday, March 23, again traded with a decline, however, this trend is very doubtful now. In general, we can see that the pair's quotes continue to decline in the long term. In principle, we have repeatedly stated in our recent reviews that in the context of one or two months, the downward movement may continue, but in general, the dollar's prospects for 2021 are not encouraging. A downward movement on the 4-hour timeframe will still mean a correction in global terms. Recall that the euro/dollar pair has risen very much in price over the past two months and in general over the past year. Thus, the total downward movement of the pair, which began in January 2020, currently totals 450 points. For 2.5 months, the pair went down 450, and for the previous 2 months – up 750. The fact that bears now do not have sufficient strength to form a full-fledged downtrend is evident. Thus, we still believe that the current strengthening of the US dollar is a temporary phenomenon. Just one currency (in our case, the euro) cannot become more expensive all the time. So now the correction period has begun. And since the outlook is long-term, the correction period may take several months, 2.5 of which have already passed. And the US dollar would have an excellent chance of growth, however, the United States continues to pour trillions of dollars into its economy. Even now, when the epidemic is on the decline, and the vaccination of the population is in full swing, the US authorities are going to pour a few more trillions of dollars into the economy.
In principle, we should think about why the US authorities are pouring such huge amounts of money into the economy at all. It is clear that in times of crisis and pandemic, all countries of the world support their economies. This is normal. However, the United States is pouring in unrealistic trillions of dollars. Although the economy continues to recover at a fairly high pace, which means that it does not require such radical measures to stimulate its growth. However, the United States is a unique country in this regard. Since the dollar is a currency that is recognized all over the world, and so far no country has managed to get rid of dollar dependence, the Fed can print money in almost any amount, accumulating formal debts. The national debt in the US is growing and what? About half of this debt is made up of loans from their own, US government funds, and the Federal Reserve. As for debt through treasury bonds, we are talking about virtually interest-free loans for the state, since inflation eats up most of the nominal yield of treasuries with any maturity. And investors buy these securities not to earn but to save and not lose. Obviously, the stronger a country, the stronger its economy, the more stable treasury securities are. Thus, the US national debt is a very ephemeral concept. At the same time, due to the huge injections of dollars into the economy, it is beginning to recover much faster than without them. And America now needs it very much, because China has coped with its virus much faster than the United States and has long since recovered from the pandemic and crisis. This means that its economy has been growing for a long time, and the losses in the second quarter of 2020 were disproportionately less than the American ones. Thus, over the past year, America has allowed China to get closer to it in the economic race. Many experts predict that China will lead the world in the next 10-20 years, believing that the Middle Kingdom will overtake the West in terms of GDP. Accordingly, the United States will already begin to lose the global race to China, so now it is extremely important to slow down economic growth in China by any means, and to increase its GDP at the maximum rate. This is exactly what Washington is doing now. They are trying to slow down the Chinese economy with the help of a trade war (even if it is not too successful for themselves) and stimulating its economy with trillions of dollars.
Let's return to the new incentive packages that may appear in the States in the first half of 2021. Recall that most recently, the US Congress approved the provision of $ 1.9 trillion in assistance to citizens, businesses, and local authorities. Now we are talking about allocating an additional $ 3 trillion for new economic stimulus. It is reported that these funds can go to the development of American infrastructure. In particular, the transport system, the Internet, 5G networks, various power systems, personnel re-profiling, and educational reform. However, this time around, the new several trillion dollars in aid to the economy may not just be printed or raised through bonds, they may be financed by rich Americans, as Joe Biden plans to raise taxes for corporations, as well as for individuals whose incomes exceed $ 400,000 a year. The new president is also going to raise several other taxes – all to attract the necessary amount of money. For the US dollar, this means a potential new fall in the long term. So far, the first $ 1.9 trillion has not yet flowed into the economy, it has only begun to be distributed among the beneficiaries. But when people, businesses, and the authorities start spending the money received from the state, then the US currency can resume falling. The same applies to the new stimulus package, which may be approved in April-May (it should be immediately clarified that the Republicans will not be able to block the project again). If all the money is raised through taxes, then the dollar will avoid a new fall. If not, it will get an additional reduction factor. In general, in 2021, we need to continue to closely monitor the indicators of changes in the volume of money supply in the US and the EU.
The volatility of the euro/dollar currency pair as of March 23 is 80 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1777 and 1.1937. A reversal of the Heiken Ashi indicator to the top will signal a new round of upward movement.
Nearest support levels: S1 – 1.1841 S2 – 1.1780 S3 – 1.1719
Nearest resistance levels: R1 – 1.1902 R2 – 1.1963 R3 – 1.2024
Trading recommendations:
The EUR/USD pair has consolidated back below the moving average, so now there are more chances for a new round of downward movement. However, the price very often changes the direction of movement in recent days. Thus, today it is recommended to stay in short positions with targets of 1.1841 and 1.1780 until the Heiken Ashi indicator turns up. It is recommended to consider buy orders if the pair is fixed back above the moving average, with targets of 1.1963 and 1.2024.
