Overview of the EUR/USD pair. June 30th. Bad news ahead of the European inflation report
June 30, 2023 7:23 am
On Thursday, the EUR/USD currency pair continued its downward trend and remained below the moving average line. It has reached the Murray level of “2/8” (1.0864), the most recent local minimum on the 4-hour timeframe. The European currency will continue to decline due to the absence of growth factors. Despite Christine Lagarde and her colleagues insisting on maintaining an aggressive course of monetary policy tightening, traders have had sufficient time and opportunities to work with this information, as we have mentioned previously. Additionally, a “head and shoulders” pattern has emerged in the 4-hour timeframe, serving as a strong signal for a reversal. Furthermore, the recent upward movement in the pair is corrective, given the preceding month-long decline in price.
Therefore, bears have an excellent opportunity to develop their recent success further. It’s important to remember that unexpected news and events can swiftly alter market sentiment in the opposite direction. Furthermore, it is crucial to acknowledge that significant players in the market make trades that are not solely based on macroeconomic or fundamental factors, such as large banks that may require a particular currency for their operational activities. Hence, it is impossible to be certain about the direction of price movement. However, everything indicates that the euro is preparing for a new wave of decline.
Consolidation is ongoing in the 24-hour timeframe, with the pair remaining within the range of 1.05–1.11. Therefore, we anticipate a new wave of decline towards the lower boundary of this range.
The inflation report in Germany does not present positive prospects. Yesterday, several important events took place. The Sintra forum continues, featuring speeches from Christine Lagarde, Jerome Powell, and other ECB and Fed representatives almost daily. Additionally, macroeconomic reports are being published. Against this backdrop, the inflation report in Germany appeared to be the least significant event. However, its significance led us to pay closer attention to overall European inflation. In June, the consumer price index in the largest economy of the European Union accelerated from 6.1% to 6.4%. While this value generally aligns with forecasts, it cannot be considered favorable. If inflation accelerates in Germany, it could also accelerate in Europe.
In such a scenario, the European currency may receive additional market support, as the market itself could interpret these figures as a signal for a stronger increase in the ECB’s key rate. Although this outcome is not guaranteed, what matters more is the market’s interpretation. The inflation report for the EU will be released today, with forecasts indicating a decrease from 6.1% to 5.6% year-on-year. Yesterday’s report provides every reason to expect it to surpass the forecasts, signaling a buying opportunity for traders.
Furthermore, core inflation may rise to 5.4-5.5%, which would also serve as a reason for purchases since this indicator has only experienced a two-month slowdown since the onset of rising inflation. It may return to its peak values today, nullifying the ECB’s efforts to combat high price growth rates.
As of June 30th, the average volatility of the EUR/USD currency pair for the last five trading days is 74 points, categorized as “average.” Consequently, we anticipate the pair to move between the levels of 1.0799 and 1.0947 on Friday. An upward reversal of the Heiken Ashi indicator will suggest a possible resumption of upward movement.
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 has reestablished itself below the moving average as the “head and shoulders” pattern has formed. It is advisable to remain in short positions with targets at 1.0803 and 1.0799 until the Heiken Ashi indicator reverses upward. Long positions will only become relevant once the price consolidates above the moving average line, with targets at 1.0947 and 1.0986.
Illustration explanations:
Linear regression channels – help determine the current trend. If both channels move in the same direction, it indicates a strong trend.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction for trading.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel within which the pair is expected to trade in the next 24 hours, based on the current volatility indicators.
CCI indicator – its entry into the oversold zone (below -250) or overbought zone (above +250) indicates an approaching trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
On Thursday, the EUR/USD currency pair continued its downward trend and remained below the moving average line. It has reached the Murray level of “2/8” (1.0864), the most recent local minimum on the 4-hour timeframe. The European currency will continue to decline due to the absence of growth factors. Despite Christine Lagarde and her colleagues insisting on maintaining an aggressive course of monetary policy tightening, traders have had sufficient time and opportunities to work with this information, as we have mentioned previously. Additionally, a “head and shoulders” pattern has emerged in the 4-hour timeframe, serving as a strong signal for a reversal. Furthermore, the recent upward movement in the pair is corrective, given the preceding month-long decline in price.
Therefore, bears have an excellent opportunity to develop their recent success further. It’s important to remember that unexpected news and events can swiftly alter market sentiment in the opposite direction. Furthermore, it is crucial to acknowledge that significant players in the market make trades that are not solely based on macroeconomic or fundamental factors, such as large banks that may require a particular currency for their operational activities. Hence, it is impossible to be certain about the direction of price movement. However, everything indicates that the euro is preparing for a new wave of decline.
Consolidation is ongoing in the 24-hour timeframe, with the pair remaining within the range of 1.05–1.11. Therefore, we anticipate a new wave of decline towards the lower boundary of this range.
The inflation report in Germany does not present positive prospects. Yesterday, several important events took place. The Sintra forum continues, featuring speeches from Christine Lagarde, Jerome Powell, and other ECB and Fed representatives almost daily. Additionally, macroeconomic reports are being published. Against this backdrop, the inflation report in Germany appeared to be the least significant event. However, its significance led us to pay closer attention to overall European inflation. In June, the consumer price index in the largest economy of the European Union accelerated from 6.1% to 6.4%. While this value generally aligns with forecasts, it cannot be considered favorable. If inflation accelerates in Germany, it could also accelerate in Europe.
In such a scenario, the European currency may receive additional market support, as the market itself could interpret these figures as a signal for a stronger increase in the ECB’s key rate. Although this outcome is not guaranteed, what matters more is the market’s interpretation. The inflation report for the EU will be released today, with forecasts indicating a decrease from 6.1% to 5.6% year-on-year. Yesterday’s report provides every reason to expect it to surpass the forecasts, signaling a buying opportunity for traders.
Furthermore, core inflation may rise to 5.4-5.5%, which would also serve as a reason for purchases since this indicator has only experienced a two-month slowdown since the onset of rising inflation. It may return to its peak values today, nullifying the ECB’s efforts to combat high price growth rates.
As of June 30th, the average volatility of the EUR/USD currency pair for the last five trading days is 74 points, categorized as “average.” Consequently, we anticipate the pair to move between the levels of 1.0799 and 1.0947 on Friday. An upward reversal of the Heiken Ashi indicator will suggest a possible resumption of upward movement.
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 has reestablished itself below the moving average as the “head and shoulders” pattern has formed. It is advisable to remain in short positions with targets at 1.0803 and 1.0799 until the Heiken Ashi indicator reverses upward. Long positions will only become relevant once the price consolidates above the moving average line, with targets at 1.0947 and 1.0986.
Illustration explanations:
Linear regression channels – help determine the current trend. If both channels move in the same direction, it indicates a strong trend.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction for trading.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel within which the pair is expected to trade in the next 24 hours, based on the current volatility indicators.
CCI indicator – its entry into the oversold zone (below -250) or overbought zone (above +250) indicates an approaching trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
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