The EUR/USD currency pair tried to resume its downward movement on Wednesday but went poorly. As a reminder, in yesterday’s article, we pointed out the latest “mind-boggling” movements of the euro/dollar pair, which are beyond logic, understanding, and technical analysis. When fundamental or macroeconomic backgrounds do not allow one to draw certain conclusions, one can turn to “technique,” which will explain what is happening in the market now. At this time, even technical analysis cannot explain what is happening. In the long term, the European currency continues to grow. Unfounded and illogical. This week, the pair barely managed to settle below the moving average for the fourth time and did not rush to form a new downward trend. On Tuesday, the pair was already above the moving average, and it was again below it yesterday. That is, even the signals of technical analysis do not allow drawing any conclusions because they are canceled and changed at the speed of light. We still expect the euro to fall, as it has no reason to continue to grow, but we remind you that when such a picture is observed on the older TFs, it is best to switch to the youngest TFs and trade intraday. It is easier to catch the trend within the day and understand how the pair will move.
The picture is the same on the 24-hour TF. The pair has consolidated above the important 50.0% Fibonacci level, which opens up excellent prospects for further growth. However, the pair has grown for over a month without corrections or reason. Someone may say that the pair showed much stronger growth between November 3 and February 2 without corrections. But then there were reasons for such a movement. Recall that inflation in the US began to slow down, which the market immediately interpreted as a signal to change the aggressive tone of the Fed regarding rates to a softer one. At the same time, the ECB had no other option but to raise the rate to its maximum. And even now (six months later), the rate is up 0.5%. That’s why the euro currency grew “in advance.” And now it’s time for the euro to fall “in advance” because all possible ECB rate hikes have been worked out over the past 6–9 months.
The Fed will raise the rate again in May, and that’s it.
Yesterday was interesting for traders, not because of the inflation report in the European Union. We mentioned in our previous articles that this report carries no weight in the eyes of traders, as it is the second estimate of the indicator. Inflation predictably reached 6.9% in March. Thus, even if the market wanted to work on this report, what would there be to work on if the forecast and actual values matched? The speech by Federal Reserve Bank of Atlanta President Raphael Bostic was much more interesting. He stated that the Fed intends to raise the key rate again in May, allowing it to complete the monetary policy tightening cycle on a major note. The Fed will then have all the conditions to expect inflation to reach its target level in the medium term. Bostic noted that the good state of the labor market and the low unemployment rate allow the regulator to tighten monetary policy by another 0.25%. He also noted the decline in inflation in recent months but said that “it is still not enough.” Mr. Bostic also noted that he supports only one rate hike and will then advocate for its preservation.
As mentioned earlier, the Fed is the only one of the three key central banks ready to raise rates as much as needed. The current state of the economy and the labor market allows it to do so. Therefore, the Bank of England may raise the rate one or two more times, and the ECB – two or three, and if inflation stops showing a decrease, these regulators will not be able to continue tightening. Most economists are confident that the ECB will raise the rate by another 0.75% over three meetings. No one even expects such growth from the Bank of England. And inflation in the UK remains above 10%. The BOE will not raise the rate another 5–6 times for the consumer price index to finally fall.
The average volatility of the euro/dollar currency pair over the last five trading days as of April 20 is 82 points and is characterized as “average.” Thus, we expect the pair to move between 1.0885 and 1.1049 on Thursday. A reversal of the Heiken Ashi indicator back up will indicate a possible resumption of the upward movement.
Nearest support levels:
S1 – 1.0864
S2 – 1.0742
S3 – 1.0620
Nearest resistance levels:
R1 – 1.0986
R2 – 1.1108
R3 – 1.1230
Trading recommendations:
The EUR/USD pair has begun the long-awaited correction. New short positions with targets of 1.0872 and 1.0864 can be considered if the price is below the moving average. Long positions can be opened after the price consolidates above the moving average line and level 1.0986, with targets of 1.1046 and 1.1108.
Explanations for illustrations:
Linear regression channels – help to determine the current trend. If both are directed in the same direction, the trend is strong.
Moving average line (settings 20,0, smoothed) – determines the short-term trend and direction in which to trade now.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) means that a trend reversal is approaching in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
The EUR/USD currency pair tried to resume its downward movement on Wednesday but went poorly. As a reminder, in yesterday’s article, we pointed out the latest “mind-boggling” movements of the euro/dollar pair, which are beyond logic, understanding, and technical analysis. When fundamental or macroeconomic backgrounds do not allow one to draw certain conclusions, one can turn to “technique,” which will explain what is happening in the market now. At this time, even technical analysis cannot explain what is happening. In the long term, the European currency continues to grow. Unfounded and illogical. This week, the pair barely managed to settle below the moving average for the fourth time and did not rush to form a new downward trend. On Tuesday, the pair was already above the moving average, and it was again below it yesterday. That is, even the signals of technical analysis do not allow drawing any conclusions because they are canceled and changed at the speed of light. We still expect the euro to fall, as it has no reason to continue to grow, but we remind you that when such a picture is observed on the older TFs, it is best to switch to the youngest TFs and trade intraday. It is easier to catch the trend within the day and understand how the pair will move.
The picture is the same on the 24-hour TF. The pair has consolidated above the important 50.0% Fibonacci level, which opens up excellent prospects for further growth. However, the pair has grown for over a month without corrections or reason. Someone may say that the pair showed much stronger growth between November 3 and February 2 without corrections. But then there were reasons for such a movement. Recall that inflation in the US began to slow down, which the market immediately interpreted as a signal to change the aggressive tone of the Fed regarding rates to a softer one. At the same time, the ECB had no other option but to raise the rate to its maximum. And even now (six months later), the rate is up 0.5%. That’s why the euro currency grew “in advance.” And now it’s time for the euro to fall “in advance” because all possible ECB rate hikes have been worked out over the past 6–9 months.
The Fed will raise the rate again in May, and that’s it.
Yesterday was interesting for traders, not because of the inflation report in the European Union. We mentioned in our previous articles that this report carries no weight in the eyes of traders, as it is the second estimate of the indicator. Inflation predictably reached 6.9% in March. Thus, even if the market wanted to work on this report, what would there be to work on if the forecast and actual values matched? The speech by Federal Reserve Bank of Atlanta President Raphael Bostic was much more interesting. He stated that the Fed intends to raise the key rate again in May, allowing it to complete the monetary policy tightening cycle on a major note. The Fed will then have all the conditions to expect inflation to reach its target level in the medium term. Bostic noted that the good state of the labor market and the low unemployment rate allow the regulator to tighten monetary policy by another 0.25%. He also noted the decline in inflation in recent months but said that “it is still not enough.” Mr. Bostic also noted that he supports only one rate hike and will then advocate for its preservation.
As mentioned earlier, the Fed is the only one of the three key central banks ready to raise rates as much as needed. The current state of the economy and the labor market allows it to do so. Therefore, the Bank of England may raise the rate one or two more times, and the ECB – two or three, and if inflation stops showing a decrease, these regulators will not be able to continue tightening. Most economists are confident that the ECB will raise the rate by another 0.75% over three meetings. No one even expects such growth from the Bank of England. And inflation in the UK remains above 10%. The BOE will not raise the rate another 5–6 times for the consumer price index to finally fall.
The average volatility of the euro/dollar currency pair over the last five trading days as of April 20 is 82 points and is characterized as “average.” Thus, we expect the pair to move between 1.0885 and 1.1049 on Thursday. A reversal of the Heiken Ashi indicator back up will indicate a possible resumption of the upward movement.
Nearest support levels:
S1 – 1.0864
S2 – 1.0742
S3 – 1.0620
Nearest resistance levels:
R1 – 1.0986
R2 – 1.1108
R3 – 1.1230
Trading recommendations:
The EUR/USD pair has begun the long-awaited correction. New short positions with targets of 1.0872 and 1.0864 can be considered if the price is below the moving average. Long positions can be opened after the price consolidates above the moving average line and level 1.0986, with targets of 1.1046 and 1.1108.
Explanations for illustrations:
Linear regression channels – help to determine the current trend. If both are directed in the same direction, the trend is strong.
Moving average line (settings 20,0, smoothed) – determines the short-term trend and direction in which to trade now.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or the overbought area (above +250) means that a trend reversal is approaching in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
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