Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: 54.1995
The EUR/USD currency pair on Thursday, April 1, continued to hold above the level of 1.1700 and start at least some significant correction. This suggests that the bears continue to "rule the ball" for the euro/dollar pair. Accordingly, the demand for the US currency remains very high and we can only figure out why and how much longer it will remain so? We have repeatedly said that in the future of one or two months, the US currency may well become more expensive against the euro. We make this conclusion based on the fact that the European currency has become more expensive for 9-10 months in 2020 and it is time for a banal technical correction. Thus, no global factors at this time may have any influence at all on the movement of the US dollar. After all, none of the traders will deny such a phenomenon as a "technical correction". Any pair can be adjusted solely based on technical factors. So why can't such a phenomenon happen in a daily timeframe? But if you look at the 24-hour timeframe, it becomes clear that it is under the classification of "correction" that the current downward movement falls. Thus, so far, everything is going according to plan. In the shorter term, there is a pronounced downward trend, so there are no questions here either: there is a trend – you need to trade under it. As for the longer-term outlook, we continue to believe that the global upward trend that began in March last year will be resumed this year. However, it should also be recognized that in recent months, several factors have emerged that may break this hypothesis or at least delay its implementation.
We still believe that the main opponents of the US currency are the US Congress and Joe Biden personally. Official statistics show that under Democratic presidents, the dollar tends to become cheaper, and under Republican presidents, it tends to become more expensive. In the case of Donald Trump, this rule did not work, however, there is also a 100% explanation for this in the form of a pandemic and an economic crisis that has swept the whole world. But Joe Biden took office at a time when the pressure from the epidemic has already eased, and the economy has already begun to recover. Therefore, we can assume that Biden rules the country in the post-crisis period. Therefore, the rule can start working again. And the main factor that worked against the dollar throughout 2020 and may continue to work in 2021 remains the same - this is the factor of inflating the money supply in the United States. It should be understood that all the money that the Fed will print and that will be poured into the economy will not disappear without a trace. There will be more money in the economy by exactly as much as will be poured into all the stimulus programs from Congress and the Fed. Now we recall the rule of occurrence of inflation: if the number of goods and services does not change, and the amount of money increases, then inflation occurs. The same applies to the exchange rate. If dollars, figuratively speaking, were 50 trillion worldwide, and became 60, then the exchange rate relative to the unchanged money supply of the euro should fall. Of course, the money supply in the European Union is also growing, but not at such a high rate. Recall that yesterday, Joe Biden revealed some details of a new "plan to save the economy", amounting to another $ 2 trillion. 650 billion will be spent on modernizing the transport system, 180 billion will be allocated to stimulate the electric car market, 400 billion will be spent on the elderly and disabled, 300 billion will be spent on stimulating the industry. Thus, we have 2 packages of $ 2 trillion that will be approved under Biden, $ 1 trillion not spent from the last stimulus program, and all the money that the Fed regularly pours into the economy, buying bonds worth $ 120 billion a month. If the Fed, after the end of the QE program, can start selling off securities and thus extract excess money from the market, then the money that will be spent on infrastructure, industry, innovation, and distributed to people will be quite difficult to extract from the economy. Of course, Joe Biden also answered the question of how the government is going to extract money from the economy. Simply put, what will form a new 2-trillion-dollar package of incentives. The answer is simple – by raising taxes for large corporations and rich Americans. The plan implies that $ 2 trillion will be covered over the next 15 years by raising taxes. But first, this money will simply be printed, and only then will it gradually return to the budget in the form of taxes. Thus, we expect that the US currency will again begin to fall in price.
It should also be noted that in the European Union, France, Germany, and some other countries announced the launch of the third "lockdown" against the background of an increased number of new coronavirus diseases. The vaccination process is still too slow, and there are still not enough vaccines. In most countries that have already introduced another quarantine, it will be in effect until the end of April. This means that the economy of these countries, as well as the entire European Union, will again shrink or show zero growth in April. Recall that European GDP declined in the fourth quarter of 2020, will decrease in the first quarter of 2021, and now problems are possible in the second quarter of 2021. Thus, the European currency is now under pressure quite rightly. But it is not necessarily that it will continue to fall.
The volatility of the euro/dollar currency pair as of April 2 is 52 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1724 and 1.1828. 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 continues its upward correction. Thus, today it is recommended to open new short positions with targets of 1.1719 and 1.1658 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 1.1828 and 1.1841.
