Overview of the EUR/USD pair. August 18th. The euro continues to fall without the support of news and reports
August 18, 2023 7:23 am
The currency pair continued its downward movement on Thursday. The movement is what we expected. The price is steadily declining, not due to strong news in favor of the dollar or weak news for the European currency. It is declining for technical reasons. The technical reasons are quite simple: the overall overbuying of the euro and its prolonged rise without corrections. Therefore, the current downward trend is entirely logical and expected.
What to expect next? We do not see compelling reasons for a sharp reversal and strong growth. It’s important to understand that the euro has been falling for several weeks, but in the 24-hour timeframe, an upward trend could still resume at any moment. The downward correction is not so strong that we could expect it to end. Therefore, in the short term, we could see a correction upward in the 4-hour timeframe, but in the medium term (in the 24-hour timeframe), the decline should continue.
We also note that there are no macroeconomic factors supporting the euro shortly. We are receiving signals from the European Union that the European Central Bank (ECB) will pause in the autumn, and some experts even believe that the rate will only be raised once more. At the same time, the Federal Reserve (Fed) may raise the rate once more by the end of the year. As a result, the entire rise of the euro in 2023 could be considered baseless because the ECB did not raise its rate more aggressively than the Fed. The ECB rate is not even close to the Fed rate, so explaining why the euro has risen is tough.
However, it is still possible. Most likely, the market expected the ECB to adopt a more aggressive monetary policy, but it did not and will not get it. As we have often stated, the ECB has to consider the interests of the 27-member alliance, so it cannot raise its rate as it sees fit, as the Fed does. Therefore, the ECB rate will inherently rise less, even with higher inflation in the European Union.
Macroeconomic statistics also do not help the euro.
The European currency also finds it challenging to expect strong support from macroeconomic reports. GDP in the second quarter grew by an “unrealistic” 0.3%, so it is challenging to conclude that the European economy is growing. Inflation is declining too slowly, and business activity indices are falling. While we have not observed any significant deterioration in macroeconomic indicators recently, strong values, not “average” ones, are needed for the European currency to grow.
At the same time, significantly stronger data is coming from the US regarding GDP, unemployment, the labor market, and other factors. Therefore, considering the overall overselling accumulated over the past 11 months, the US currency has much greater potential for growth than the euro shortly. The CCI indicator is around the zero level, indicating virtually “zero” movements. Volatility is weak, which significantly hampers trading in the 4-hour timeframe. Trades should be held for at least several days to expect substantial profit.
The average volatility of the EUR/USD currency pair over the last five trading days, as of August 18th, is 66 points and is characterized as “average.” Therefore, we expect the pair to move between the levels of 1.0818 and 1.0950 on Friday. An upward reversal of the Heiken Ashi indicator will indicate a new round of upward correction.
Nearest support levels:
S1 – 1.0864
S2 – 1.0803
S3 – 1.0742
Nearest resistance levels:
R1 – 1.0925
R2 – 1.0986
R3 – 1.1047
Trading recommendations:
The EUR/USD pair continues to trend downward at this time. Short positions can be held with targets at 1.0818 and 1.0803 until the Heiken Ashi indicator turns upward. Long positions can be considered if the price is fixed above the moving average with a target of 1.0986.
Explanation of illustrations:
Linear regression channels – help determine the current trend. If both point in the same direction, the trend is currently strong.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel 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) indicates that a trend reversal is approaching in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
The currency pair continued its downward movement on Thursday. The movement is what we expected. The price is steadily declining, not due to strong news in favor of the dollar or weak news for the European currency. It is declining for technical reasons. The technical reasons are quite simple: the overall overbuying of the euro and its prolonged rise without corrections. Therefore, the current downward trend is entirely logical and expected.
What to expect next? We do not see compelling reasons for a sharp reversal and strong growth. It’s important to understand that the euro has been falling for several weeks, but in the 24-hour timeframe, an upward trend could still resume at any moment. The downward correction is not so strong that we could expect it to end. Therefore, in the short term, we could see a correction upward in the 4-hour timeframe, but in the medium term (in the 24-hour timeframe), the decline should continue.
We also note that there are no macroeconomic factors supporting the euro shortly. We are receiving signals from the European Union that the European Central Bank (ECB) will pause in the autumn, and some experts even believe that the rate will only be raised once more. At the same time, the Federal Reserve (Fed) may raise the rate once more by the end of the year. As a result, the entire rise of the euro in 2023 could be considered baseless because the ECB did not raise its rate more aggressively than the Fed. The ECB rate is not even close to the Fed rate, so explaining why the euro has risen is tough.
However, it is still possible. Most likely, the market expected the ECB to adopt a more aggressive monetary policy, but it did not and will not get it. As we have often stated, the ECB has to consider the interests of the 27-member alliance, so it cannot raise its rate as it sees fit, as the Fed does. Therefore, the ECB rate will inherently rise less, even with higher inflation in the European Union.
Macroeconomic statistics also do not help the euro.
The European currency also finds it challenging to expect strong support from macroeconomic reports. GDP in the second quarter grew by an “unrealistic” 0.3%, so it is challenging to conclude that the European economy is growing. Inflation is declining too slowly, and business activity indices are falling. While we have not observed any significant deterioration in macroeconomic indicators recently, strong values, not “average” ones, are needed for the European currency to grow.
At the same time, significantly stronger data is coming from the US regarding GDP, unemployment, the labor market, and other factors. Therefore, considering the overall overselling accumulated over the past 11 months, the US currency has much greater potential for growth than the euro shortly. The CCI indicator is around the zero level, indicating virtually “zero” movements. Volatility is weak, which significantly hampers trading in the 4-hour timeframe. Trades should be held for at least several days to expect substantial profit.
The average volatility of the EUR/USD currency pair over the last five trading days, as of August 18th, is 66 points and is characterized as “average.” Therefore, we expect the pair to move between the levels of 1.0818 and 1.0950 on Friday. An upward reversal of the Heiken Ashi indicator will indicate a new round of upward correction.
Nearest support levels:
S1 – 1.0864
S2 – 1.0803
S3 – 1.0742
Nearest resistance levels:
R1 – 1.0925
R2 – 1.0986
R3 – 1.1047
Trading recommendations:
The EUR/USD pair continues to trend downward at this time. Short positions can be held with targets at 1.0818 and 1.0803 until the Heiken Ashi indicator turns upward. Long positions can be considered if the price is fixed above the moving average with a target of 1.0986.
Explanation of illustrations:
Linear regression channels – help determine the current trend. If both point in the same direction, the trend is currently strong.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel 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) indicates 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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