Overview of EUR/USD on April 23. Preview of the week: Friday’s GDP and nothing more
April 23, 2023 4:23 pm
On Friday, the EUR/USD currency pair continued to trade in a limited range, or, in other words, flat. The past week has been low-volatile, with the pair mainly moving sideways. At the same time, it maintains an upward trend, has been near its highest levels for several months, and still cannot correct downward. Thus, nothing new can be said about the technical picture. Traders are no longer paying any attention to the moving average line. Fixing it above or below it has no meaning. We still believe that the European currency is undeservedly high, but what can you do if the market refuses to close long positions and open short ones?
We have repeatedly said there are no reasons for the European currency to grow. How long will this process continue if the market has recently been working out higher “hawkish” expectations for the ECB rate? After all, there is a limit to everything, and the need to correct it occasionally is not canceled. Even if the euro had reasons to grow now, it still would not cancel the fact that a correction is necessary. But we have a situation where the factors for growth are very doubtful, and at the same time, there are no corrections. The occasional declines we see are not corrections, just ordinary retracements.
Therefore, we continue to insist on the illogical nature of the current movement, after which the inevitable “payback” will follow. The market no longer pays any attention to the fact that the Fed is still raising its key rate and has not yet taken a break. The dollar has been falling for 7–8 months while the Fed’s rate is growing. And it is growing faster and stronger than the ECB’s rate. The Fed’s rate hike was also worked out in advance when the dollar grew strongly last year. But the same can be said about the ECB rate: its growth has also been “worked out” in advance and with interest.
There will be a few statistics next week.
Next week, there will be a few important events in the European Union. In principle, only the GDP report for the fourth quarter (first estimate) can be singled out, which will be available on Friday. It is expected that the European economy will grow by 0.1-0.2% in quarterly terms, which only confirms our long-standing conclusions: the EU economy continues to be on the verge of recession, further tightening of monetary policy will only create stronger pressure on it, and the ECB is unlikely to allow negative GDP. In this case, the economy will have to be stimulated again. And stimulation means new money injections and rate cuts, fueling inflation.
Thus, “balance” is the key word now for the European regulator. The balance between inflation and interest rates. That is why we believe that the ECB will raise rates three more times by 0.25%, which is not much different from the Fed’s plans, which will raise the rate in May by 0.25%, and by the end of the year will apply a maximum of one more tightening. If this interest rate divergence of 0.5% until the end of the year provokes an almost unstoppable growth of the euro currency, then we have nothing more to say. The euro has already risen by 550 points over the last month. However, the statistics were objectively stronger in the US, and there were no “ultra-hawkish” statements from ECB representatives.
Separately, it is worth noting the macroeconomic data from Germany. On the same Friday, data on inflation for April and GDP for the fourth quarter will be published. The consumer price index is expected to slow from 7.4% to 7.3%, while GDP will grow by 0.2-0.3% q/q. Nothing new. Inflation is falling slowly; the rate needs to continue to be raised, but the ECB will no longer be able to maintain tightening rates of 0.5% per meeting. GDP is growing very weakly, but at least it is still growing. The situation is not critical but dangerous. Traders should pay more attention to US events and publications next week.
The average volatility of the euro/dollar currency pair for the last five trading days as of April 24 is 66 points and is characterized as “medium-low.” Thus, we expect the pair to move between 1.0922 and 1.1054 on Monday. A reversal of the Heiken Ashi indicator back down will indicate a possible resumption of the downward 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 started the long-awaited correction, which again turns out to be quite weak. The pair is currently almost immobilized and is trading flat. You can trade based on the reversals of the Heiken Ashi indicator, but it is best to trade on the youngest TFs or wait for the flat to end.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both are directed in one direction, the trend is currently strong.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction 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 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
On Friday, the EUR/USD currency pair continued to trade in a limited range, or, in other words, flat. The past week has been low-volatile, with the pair mainly moving sideways. At the same time, it maintains an upward trend, has been near its highest levels for several months, and still cannot correct downward. Thus, nothing new can be said about the technical picture. Traders are no longer paying any attention to the moving average line. Fixing it above or below it has no meaning. We still believe that the European currency is undeservedly high, but what can you do if the market refuses to close long positions and open short ones?
We have repeatedly said there are no reasons for the European currency to grow. How long will this process continue if the market has recently been working out higher “hawkish” expectations for the ECB rate? After all, there is a limit to everything, and the need to correct it occasionally is not canceled. Even if the euro had reasons to grow now, it still would not cancel the fact that a correction is necessary. But we have a situation where the factors for growth are very doubtful, and at the same time, there are no corrections. The occasional declines we see are not corrections, just ordinary retracements.
Therefore, we continue to insist on the illogical nature of the current movement, after which the inevitable “payback” will follow. The market no longer pays any attention to the fact that the Fed is still raising its key rate and has not yet taken a break. The dollar has been falling for 7–8 months while the Fed’s rate is growing. And it is growing faster and stronger than the ECB’s rate. The Fed’s rate hike was also worked out in advance when the dollar grew strongly last year. But the same can be said about the ECB rate: its growth has also been “worked out” in advance and with interest.
There will be a few statistics next week.
Next week, there will be a few important events in the European Union. In principle, only the GDP report for the fourth quarter (first estimate) can be singled out, which will be available on Friday. It is expected that the European economy will grow by 0.1-0.2% in quarterly terms, which only confirms our long-standing conclusions: the EU economy continues to be on the verge of recession, further tightening of monetary policy will only create stronger pressure on it, and the ECB is unlikely to allow negative GDP. In this case, the economy will have to be stimulated again. And stimulation means new money injections and rate cuts, fueling inflation.
Thus, “balance” is the key word now for the European regulator. The balance between inflation and interest rates. That is why we believe that the ECB will raise rates three more times by 0.25%, which is not much different from the Fed’s plans, which will raise the rate in May by 0.25%, and by the end of the year will apply a maximum of one more tightening. If this interest rate divergence of 0.5% until the end of the year provokes an almost unstoppable growth of the euro currency, then we have nothing more to say. The euro has already risen by 550 points over the last month. However, the statistics were objectively stronger in the US, and there were no “ultra-hawkish” statements from ECB representatives.
Separately, it is worth noting the macroeconomic data from Germany. On the same Friday, data on inflation for April and GDP for the fourth quarter will be published. The consumer price index is expected to slow from 7.4% to 7.3%, while GDP will grow by 0.2-0.3% q/q. Nothing new. Inflation is falling slowly; the rate needs to continue to be raised, but the ECB will no longer be able to maintain tightening rates of 0.5% per meeting. GDP is growing very weakly, but at least it is still growing. The situation is not critical but dangerous. Traders should pay more attention to US events and publications next week.
The average volatility of the euro/dollar currency pair for the last five trading days as of April 24 is 66 points and is characterized as “medium-low.” Thus, we expect the pair to move between 1.0922 and 1.1054 on Monday. A reversal of the Heiken Ashi indicator back down will indicate a possible resumption of the downward 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 started the long-awaited correction, which again turns out to be quite weak. The pair is currently almost immobilized and is trading flat. You can trade based on the reversals of the Heiken Ashi indicator, but it is best to trade on the youngest TFs or wait for the flat to end.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both are directed in one direction, the trend is currently strong.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction 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 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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