Overview of the EUR/USD pair. June 19. Boring Friday and a preview of the new week
June 19, 2023 5:24 am
The currency pair EUR/USD stayed in one place for most of Friday. Volatility was close to zero, unsurprising after a fairly active week. Recall that during the past week, two central bank meetings and a series of important reports were published. The euro showed strong growth for the week, which seems strange considering that we expect a resumption of the downward trend. We cannot say there were no grounds for the euro to rise, but the growth was excessive, especially on Thursday when the ECB decided to raise the rate by another 0.25%, as known a couple of months ago. Nevertheless, the rhetoric of Christine Lagarde, who hinted that the rate could rise for a longer period than expected, helped the euro show a significant increase again.
There needs to be more sense in analyzing the reports and events on Friday. The fact is that there were hardly any of them. Inflation in the European Union remained unchanged in the second estimate for May, at 6.1% y/y. Core inflation decreased to 5.3%, corresponding to the first estimate. In addition to European inflation, the University of Michigan’s consumer sentiment index was published in the United States, which rose to 63.9 points, slightly higher than forecasts. Still, considering the volatility of 52 points, the reaction was either minimal or absent.
The most important thing happened in the 24-hour timeframe. The pair once again consolidated above the key Senkou Span B and Kijun-sen lines, opening up prospects for resuming the upward trend that has been going on for ten months. There are two possible scenarios. Either a resumption of the upward trend or a continuation of the consolidation. As we mentioned earlier, all the movements of 2023 fit well into the concept of consolidation – when the pair moves within a limited price range, not in a flat or sideways channel. Therefore, a rise to the 11th level is possible now, followed by a new decline to the 6th level.
Representatives of the ECB can strengthen market confidence in the euro. The new week can be called uneventful in terms of macroeconomic data. Economic publications in the European Union are scheduled only for Friday and will be business activity indices for June. According to forecasts, business activity will likely stay the same in the first month of summer: the industry will remain in recession while the services sector will continue to grow. However, there will be about a dozen speeches by the ECB’s Monetary Committee representatives during the week. Philip Lane, Luis de Guindos, Isabel Schnabel, and several other committee members will speak, and some of them will speak twice. And these are only the officially scheduled speeches, not considering possible interviews with various publications and TV.
At the moment, the rhetoric of ECB representatives is very important because, last week, Lagarde made it clear that the rate could continue to rise both in the summer and autumn. The European economy has formally entered a recession, as GDP contracted by 0.1% in the last two quarters. However, according to ECB forecasts, there will be a small increase by the end of 2023. The ECB rate will not exceed 4.25%, but knowing what the market thinks about it is important. And what the market thinks when Lagarde practically openly declares additional tightening of monetary policy?
Thus, the euro unexpectedly receives new growth factors, but we want to remind you that the Fed may raise the rate 1-2 more times. Also, remember that the American economy is much more favorable than the European one, with the Fed rate being much higher than the ECB rate. Therefore, there should be a moderate rise in the euro. However, this is the market. As we can see, the technical picture can be turned upside down in just a week. Also, note that the CCI indicator has entered the overbought zone, a strong signal for a downward reversal.
The average volatility of the euro/dollar currency pair over the last five trading days as of June 19th is 80 pips and is characterized as “average.” Thus, we expect the pair to move between the levels of 1.0856 and 1.1016 on Monday. A reversal of the upward Heiken Ashi indicator will indicate a resumption of the upward movement.
The nearest support levels:
S1 – 1.0925
S2 – 1.0864
S3 – 1.0803
Nearest resistance levels:
R1 – 1.0986
R2 – 1.1047
R3 – 1.1108
Trading recommendations:
The EUR/USD pair stays above the moving average line and grows. Long positions should be considered with targets at 1.0986 and 1.1016 in case the Heiken Ashi indicator reverses upward. Short positions will become relevant only after the price drops below the moving average line, with targets at 1.0803 and 1.0742.
Explanation of illustrations:
Linear regression channels – help determine the current trend. If both channels point in the same direction, the trend is strong.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and direction for trading.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel where the pair is expected to trade the next day based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or overbought area (above +250) indicates an approaching trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
The currency pair EUR/USD stayed in one place for most of Friday. Volatility was close to zero, unsurprising after a fairly active week. Recall that during the past week, two central bank meetings and a series of important reports were published. The euro showed strong growth for the week, which seems strange considering that we expect a resumption of the downward trend. We cannot say there were no grounds for the euro to rise, but the growth was excessive, especially on Thursday when the ECB decided to raise the rate by another 0.25%, as known a couple of months ago. Nevertheless, the rhetoric of Christine Lagarde, who hinted that the rate could rise for a longer period than expected, helped the euro show a significant increase again.
There needs to be more sense in analyzing the reports and events on Friday. The fact is that there were hardly any of them. Inflation in the European Union remained unchanged in the second estimate for May, at 6.1% y/y. Core inflation decreased to 5.3%, corresponding to the first estimate. In addition to European inflation, the University of Michigan’s consumer sentiment index was published in the United States, which rose to 63.9 points, slightly higher than forecasts. Still, considering the volatility of 52 points, the reaction was either minimal or absent.
The most important thing happened in the 24-hour timeframe. The pair once again consolidated above the key Senkou Span B and Kijun-sen lines, opening up prospects for resuming the upward trend that has been going on for ten months. There are two possible scenarios. Either a resumption of the upward trend or a continuation of the consolidation. As we mentioned earlier, all the movements of 2023 fit well into the concept of consolidation – when the pair moves within a limited price range, not in a flat or sideways channel. Therefore, a rise to the 11th level is possible now, followed by a new decline to the 6th level.
Representatives of the ECB can strengthen market confidence in the euro. The new week can be called uneventful in terms of macroeconomic data. Economic publications in the European Union are scheduled only for Friday and will be business activity indices for June. According to forecasts, business activity will likely stay the same in the first month of summer: the industry will remain in recession while the services sector will continue to grow. However, there will be about a dozen speeches by the ECB’s Monetary Committee representatives during the week. Philip Lane, Luis de Guindos, Isabel Schnabel, and several other committee members will speak, and some of them will speak twice. And these are only the officially scheduled speeches, not considering possible interviews with various publications and TV.
At the moment, the rhetoric of ECB representatives is very important because, last week, Lagarde made it clear that the rate could continue to rise both in the summer and autumn. The European economy has formally entered a recession, as GDP contracted by 0.1% in the last two quarters. However, according to ECB forecasts, there will be a small increase by the end of 2023. The ECB rate will not exceed 4.25%, but knowing what the market thinks about it is important. And what the market thinks when Lagarde practically openly declares additional tightening of monetary policy?
Thus, the euro unexpectedly receives new growth factors, but we want to remind you that the Fed may raise the rate 1-2 more times. Also, remember that the American economy is much more favorable than the European one, with the Fed rate being much higher than the ECB rate. Therefore, there should be a moderate rise in the euro. However, this is the market. As we can see, the technical picture can be turned upside down in just a week. Also, note that the CCI indicator has entered the overbought zone, a strong signal for a downward reversal.
The average volatility of the euro/dollar currency pair over the last five trading days as of June 19th is 80 pips and is characterized as “average.” Thus, we expect the pair to move between the levels of 1.0856 and 1.1016 on Monday. A reversal of the upward Heiken Ashi indicator will indicate a resumption of the upward movement.
The nearest support levels:
S1 – 1.0925
S2 – 1.0864
S3 – 1.0803
Nearest resistance levels:
R1 – 1.0986
R2 – 1.1047
R3 – 1.1108
Trading recommendations:
The EUR/USD pair stays above the moving average line and grows. Long positions should be considered with targets at 1.0986 and 1.1016 in case the Heiken Ashi indicator reverses upward. Short positions will become relevant only after the price drops below the moving average line, with targets at 1.0803 and 1.0742.
Explanation of illustrations:
Linear regression channels – help determine the current trend. If both channels point in the same direction, the trend is strong.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and direction for trading.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel where the pair is expected to trade the next day based on current volatility indicators.
CCI indicator – its entry into the oversold area (below -250) or overbought area (above +250) indicates an approaching trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
Related Posts: