Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -63.2382
The EUR/USD currency pair on Wednesday, March 31, tried to start a round of upward correction, but everything looked quite pathetic. In general, no one will deny that at the moment there is a downward trend and it is not yet clear how it can be broken. However, it is this scenario that we have already discussed many times. First, the trend has already been formed – so it's a sin not to work it out and think about an upward movement now. Secondly, in global terms, the European currency has been growing for a year, and falling for only 3 months, so from the point of view of the correction scenario – everything is logical and clear. Third, there are serious concerns that despite the high rate of recovery in the US economy, the US dollar will collapse sooner or later. This is supported by the trillion-dollar incentive programs that are being implemented in America. By the way, it was under Donald Trump that these programs were at least somehow discussed with the opposition forces and their size was adjusted. But Donald Trump lost the election, and the Republican senators did not retain their majority. Therefore, at least in the next two years, the Democrats will "rule the ball". And the Democrats, led by Joe Biden, intend to pump the American economy with dollars to the brim. Maybe this is the way out for the US in the current situation. We have already written earlier that America needs to worry about a possible change in the world leader in the coming decades, and not about the size of its national debt, which was constantly growing even before the pandemic crisis. China has suffered much less from its virus and has long since recovered from the epidemic. And the American economy has been stalling for quite a long time. Now it needs to catch up with China by all means or increase the gap from it. Thus, it is hardly necessary to blame the American authorities for the fact that they pour trillions of dollars into the economy. For them, this is a well-founded path. But for the US dollar – it is a stone on the neck before jumping into the sea. It is very hard to believe that such huge amounts will pass without a trace for the US currency. Especially because in 2021, only the US Congress and the Treasury can pour about 6-7 trillion more into the economy. And that's not counting the money from the Fed. Thus, we believe that in the long term, the upward trend for the euro/dollar pair will resume, and what we are seeing now is a correction or acceleration before a new upward movement.
Meanwhile, Bloomberg Economics published data yesterday showing that households in the world's largest countries have accumulated huge amounts of money during the pandemic. This data is based on deposits placed in a particular country. Recall that in many countries, deposit rates are now either zero or negative. That is, when placing funds every year, your amount of money will decrease due to the negative rate and inflation. This is done to encourage households to invest in the economy, and not to keep money "under the pillow". But where to invest, if business around the world is not experiencing the best of times? If the whole world has been in regular "lockdowns" for the last year. In general, many ordinary people decided that it is better to lose a couple of percents a year than to invest in a risky business and lose everything. In America, the population has accumulated 1.5 trillion dollars, in Germany - 142 billion euros, in France - 125 billion euros. Many experts believe that it is this money (which sooner or later will begin to "get out from under the mattresses") that will stimulate the economy to grow. They say that the population will start spending their money, which will provoke an increase in retail sales, growth in production and services, and GDP growth. From our point of view, people became very cautious during the pandemic and now many people understand that it is not recommended to live without a financial cushion now. Usually, people rely on the help of relatives in difficult times. But what if most of your relatives need help themselves? Thus, we believe that now people will still need to be forced to spend this money. The pandemic is not yet over, and the third "wave" has begun in Europe, despite the vaccination that has begun after all. Thus, now is not the time to "walk on all the money". Moreover, the world has not yet overcome the "coronavirus". Who knows what other surprises this "Chinese virus" will bring? Already, new strains are being discovered around the world, and not all vaccines are effective against them. It is such reflections that will keep many people from rash spending and purchases. Moreover, even if there was a desire to invest this money, where to invest it now? The US stock market is becoming more like a "bubble" every day. The cryptocurrency segment is a bubble since any cryptocurrency is a useless and worthless piece of code. Bonds are now not the most attractive investment tool, they are now more often disposed of than bought. In general, we believe that most of this money will remain under the pillow. And in the United States, another package of incentives may be approved in the near future, which this time will not be distributed among the residents of the country. It will be focused entirely on modernization and infrastructure. But one way or another, it will again be poured into the economy. Thus, in the long term, in any case, we expect an increase in inflation. And the fall of the US currency. As the skewed balance between the money supply of the European Union and the United States continues.
The volatility of the euro/dollar currency pair as of April 1 is 52 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1688 and 1.1792. The reversal of the Heiken Ashi indicator back down will signal the resumption of the downward movement.
Nearest support levels: S1 – 1.1719 S2 – 1.1658 S3 – 1.1597
Nearest resistance levels: R1 – 1.1780 R2 – 1.1841 R3 – 1.1902
Trading recommendations:
The EUR/USD pair has started a round of upward correction. Thus, today it is recommended to open new short positions with targets of 1.1719 and 1.1688 in the event of a reversal of the Heiken Ashi indicator down or a rebound of the price from the moving average. It is recommended to consider buy orders if the pair is fixed above the moving average line, with targets of 1.1841 and 1.1902.
