Overview of the EUR/USD pair. May 26th. The dollar is unaffected by the banking crisis and unresolved debt problem
May 26, 2023 6:26 am
The EUR/USD currency pair continued downward on Thursday, ignoring the fundamental and macroeconomic background. By this, we mean that a certain global background always exists, even when there is no macroeconomic data or fundamental events within a particular day. The US dollar appreciates every day, which aligns with our expectations. Recall that for over a month, we have been asking, “Why is the euro currency rising?” and saying that the time will come to “repay debts.” That time has come – the European currency has been falling for two consecutive weeks, which is fair, considering its overbought level and the baselessness of its high position. Therefore, we expect a further decline. Through a correction, perhaps even without any pauses.
Now let’s consider the local fundamental background. There were no important publications yesterday. The dollar was rising even before the release of two reports in the United States, which we initially called insignificant. The market did not even expect their publication; it immediately began to sell. Or, rather, it did not stop doing so. Therefore, from our point of view, the “fundamentals” and macroeconomics currently mean nothing. The main factors are the overbought euro and the oversold dollar. No banking crises in the US, debt problems, ordinary macroeconomic statistics, or dozens of speeches by ECB and Fed representatives matter now. Only some extravagant events in the “shock” category can change the traders’ sentiment. Thank goodness, there are currently no such events.
On the 24-hour TF, the pair crossed an important Senkou Span B line, so we received another strong sell signal. The nearest target is the Fibonacci level of 38.2% (1.0608), but the decline may continue well below this level.
One week until default, but the dollar continues to rise.
Most of all, we are amused and surprised by the position of some experts who believe that the dollar is rising due to decreased risk sentiment. Let’s take a closer look at the situation. According to many experts, the United States is in a pre-default state. At the same time, the market is buying the dollar because it is the world’s reserve currency. Kristalina Georgieva (IMF Managing Director) believes there will be no default, and the dollar will remain the main reserve currency. No major or central banks are rushing to get rid of the American currency (otherwise, it would fall). So what do we have here: the market is buying a country’s currency that may declare a default in a week? Then this is called an increase in risk sentiment because the dollar is currently a very risky currency.
The situation with reaching the US debt limit has no impact on the dollar or the currency market. No one seriously believes in the possibility of default by the world’s largest economy, not due to some reasons beyond the control of the United States (a world war or a global abandonment of the dollar), but due to the inability of Republicans and Democrats to agree on what is vital to them. In other words, we have a situation where all congressional members need to agree to have the basic ability to remain in power, but does anyone believe that they will ultimately fail to reach an agreement? They won’t agree on an issue on the agenda every year? Even if a default is allowed, what will it change? It is obvious to everyone that the problem is not in the American economy, not in its weakness, but in the inability of political parties to work together. Change the members of Congress in the next elections, and the economy will continue to be the strongest in the world!
We don’t even want to mention that politicians can “freeze” the debt ceiling for a couple of months. During negotiations, the House of Representatives goes on vacation. That’s all you need to know about the heated passions in the American Congress. Even in the political sphere of America itself, they don’t believe in default, so the dollar continues to rise peacefully. Almost all possible factors now speak in favor of its strengthening. The ECB and Fed interest rate factors no longer affect the market. It has long been worked out.
The average volatility of the euro/dollar currency pair for the past five trading days as of May 26 is 54 points and is characterized as “average.” Therefore, we expect the pair to move between the levels of 1.0676 and 1.0784 on Friday. A reversal of the Heiken Ashi indicator upwards will indicate a new phase of the corrective movement.
Nearest support levels:
S1 – 1.0681
S2 – 1.0620
Nearest resistance levels:
R1 – 1.0742
R2 – 1.0803
R3 – 1.0863
Trading recommendations:
The EUR/USD pair continues its downward movement. It is advisable to remain in short positions with targets at 1.0681 and 1.0620 until the price consolidates above the moving average. Long positions will become relevant only after the price consolidates above the moving average line with a target of 1.0864.
Explanation of illustrations:
Linear regression channels – help determine the current trend. If both channels are pointing in the same direction, the trend is strong now.
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) – probable price channel within which the pair will likely move in 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 EUR/USD currency pair continued downward on Thursday, ignoring the fundamental and macroeconomic background. By this, we mean that a certain global background always exists, even when there is no macroeconomic data or fundamental events within a particular day. The US dollar appreciates every day, which aligns with our expectations. Recall that for over a month, we have been asking, “Why is the euro currency rising?” and saying that the time will come to “repay debts.” That time has come – the European currency has been falling for two consecutive weeks, which is fair, considering its overbought level and the baselessness of its high position. Therefore, we expect a further decline. Through a correction, perhaps even without any pauses.
Now let’s consider the local fundamental background. There were no important publications yesterday. The dollar was rising even before the release of two reports in the United States, which we initially called insignificant. The market did not even expect their publication; it immediately began to sell. Or, rather, it did not stop doing so. Therefore, from our point of view, the “fundamentals” and macroeconomics currently mean nothing. The main factors are the overbought euro and the oversold dollar. No banking crises in the US, debt problems, ordinary macroeconomic statistics, or dozens of speeches by ECB and Fed representatives matter now. Only some extravagant events in the “shock” category can change the traders’ sentiment. Thank goodness, there are currently no such events.
On the 24-hour TF, the pair crossed an important Senkou Span B line, so we received another strong sell signal. The nearest target is the Fibonacci level of 38.2% (1.0608), but the decline may continue well below this level.
One week until default, but the dollar continues to rise.
Most of all, we are amused and surprised by the position of some experts who believe that the dollar is rising due to decreased risk sentiment. Let’s take a closer look at the situation. According to many experts, the United States is in a pre-default state. At the same time, the market is buying the dollar because it is the world’s reserve currency. Kristalina Georgieva (IMF Managing Director) believes there will be no default, and the dollar will remain the main reserve currency. No major or central banks are rushing to get rid of the American currency (otherwise, it would fall). So what do we have here: the market is buying a country’s currency that may declare a default in a week? Then this is called an increase in risk sentiment because the dollar is currently a very risky currency.
The situation with reaching the US debt limit has no impact on the dollar or the currency market. No one seriously believes in the possibility of default by the world’s largest economy, not due to some reasons beyond the control of the United States (a world war or a global abandonment of the dollar), but due to the inability of Republicans and Democrats to agree on what is vital to them. In other words, we have a situation where all congressional members need to agree to have the basic ability to remain in power, but does anyone believe that they will ultimately fail to reach an agreement? They won’t agree on an issue on the agenda every year? Even if a default is allowed, what will it change? It is obvious to everyone that the problem is not in the American economy, not in its weakness, but in the inability of political parties to work together. Change the members of Congress in the next elections, and the economy will continue to be the strongest in the world!
We don’t even want to mention that politicians can “freeze” the debt ceiling for a couple of months. During negotiations, the House of Representatives goes on vacation. That’s all you need to know about the heated passions in the American Congress. Even in the political sphere of America itself, they don’t believe in default, so the dollar continues to rise peacefully. Almost all possible factors now speak in favor of its strengthening. The ECB and Fed interest rate factors no longer affect the market. It has long been worked out.
The average volatility of the euro/dollar currency pair for the past five trading days as of May 26 is 54 points and is characterized as “average.” Therefore, we expect the pair to move between the levels of 1.0676 and 1.0784 on Friday. A reversal of the Heiken Ashi indicator upwards will indicate a new phase of the corrective movement.
Nearest support levels:
S1 – 1.0681
S2 – 1.0620
Nearest resistance levels:
R1 – 1.0742
R2 – 1.0803
R3 – 1.0863
Trading recommendations:
The EUR/USD pair continues its downward movement. It is advisable to remain in short positions with targets at 1.0681 and 1.0620 until the price consolidates above the moving average. Long positions will become relevant only after the price consolidates above the moving average line with a target of 1.0864.
Explanation of illustrations:
Linear regression channels – help determine the current trend. If both channels are pointing in the same direction, the trend is strong now.
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) – probable price channel within which the pair will likely move in 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
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