Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: 25.3200
The EUR/USD currency pair was trading extra calmly on Friday, April 2. Perhaps this was due to the day off in some countries of the world, in particular in the European Union, as the Catholic Good Friday was celebrated. However, there was no day off in the United States, so it is still strange that the markets did not react at all to the strongest data on the number of new jobs created outside of agriculture. Moreover, on Friday, both the pound and the euro simply stood still all day. The volatility was minimal. Of course, we can assume that the markets will work out strong statistics from overseas on Monday. The technical picture now indicates the continuation of the downward trend, as both linear regression channels are still directed downwards, and the price is located below the moving average line. Therefore, if the strengthening of the US dollar begins from the very morning of Monday, then there will be nothing to be surprised about. The question is, will this be a technical continuation of the dollar's growth or a delayed reaction to strong statistics from overseas? Anyway, the Heiken Ashi indicator has already turned down, and the price has bounced off the moving average. Therefore, the springboard for opening short positions is now good.
And what if today the US currency is not in demand and growth does not work? Then what about the lack of reaction to the most important and strong reports on unemployment and Nonfarm Payrolls on Friday? From our point of view, this will mean that the markets are preparing for a reversal. Yes, the American economy is recovering very quickly, however, it will be faster than the European one, for several more quarters for sure. In Europe, the third wave of the "coronavirus" has now begun, so in the second quarter, as in the first, as in the fourth-2020, there may be a negative GDP. In the United States, there are no problems with vaccination now and by the summer, the entire adult population can receive the necessary doses of the vaccine. Thus, nothing will prevent the US economy from continuing to grow while its European counterpart is "lying with the temperature".
But there is one "but" and we have already noted this many times. This "but" is the price at which the American economy is now recovering. The US government has poured in trillions of dollars to spur the recovery. The stock market has inflated to an incredible scale "bubble", which is completely out of line with what is happening in the world over the past year. Although government bond yields have been rising recently, they remain below potential inflation. The US national debt has grown to $ 30 trillion. The trade balance remains negative. In general, if investors rush to continue buying shares listed on the US stock market against the backdrop of the US economic recovery, then sooner or later, the "bubble" will burst. At the same time, many experts believe that this time the "puncture" will be much stronger since the economy has not yet recovered from the "coronavirus crisis". So, first of all, the economy is recovering, however, this does not mean that there are no problems and everyone needs to urgently run to invest in the United States and its economy. Secondly, the artificially inflated dollar mass cannot pass without a trace for the dollar exchange rate.
It should be recognized that we expected a strong downward correction for the euro at the end of last year. And the fact that it has been going on for three months does not surprise us at all. The trend was strong and prolonged, so three months of correction is normal. Now this correction may be a little delayed, as the European Union managed to fail vaccination, so the recovery in the second quarter is postponed. In the EU, only about 10% of the population has been vaccinated at the moment. Thus, if the United States and the United Kingdom are going to finish vaccinating the population by the summer or at most in the summer, then in the European Union it may take much longer. And the "coronavirus" will not wait. At the moment, for example, in Poland, there are higher levels of morbidity than during the second "wave". High levels in the Czech Republic, the Netherlands, Germany, Italy, and France. Accordingly, the downward correction may be delayed for another one or two months, until the European Union gets on the road to rapid vaccination.
Moreover, the notorious EU economic recovery fund, which was approved last summer, has not yet been formed and distributed. Moreover, so far 11 EU member states have not even ratified this fund. Moreover, the German Constitutional Court recently blocked the entry into force of the law on the ratification of the restoration fund. The court in Karlsruhe considers that the creation of such a fund is contrary to EU law, which prohibits Article 311 from financing expenses by issuing single debt obligations. Thus, at the moment, it is not even clear when this fund will be formed and distributed, and many EU countries need loans and grants, without which they cannot start recovery. Or this recovery is too difficult. So Europe, at the beginning of 2021, had some very difficult problems that make it difficult to recover its economy and make it difficult to resume the upward trend in the euro/dollar.
From all this, it follows that while the downward trend persists on the 4-hour timeframe, you should trade down. And this trend may continue for some time. But overall, we continue to believe that the US dollar will resume its decline in 2021. We do not recommend guessing possible reversals of the global trend to the top, however, we need to be prepared for such a development.
The volatility of the euro/dollar currency pair as of April 5 is 52 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1708 and 1.1812. The reversal of the Heiken Ashi indicator back to the top signals a possible continuation of the upward 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 may resume its downward trend. Thus, today it is recommended to open new short positions with targets of 1.1719 and 1.1658, since the price has already bounced off the moving average, and the Heiken Ashi indicator has already turned down. It is recommended to consider buy orders if the pair is fixed above the moving average line with targets of 1.1812 and 1.1841.
