Overview of the EUR/USD pair. October 19th. The euro lacks support from the macroeconomic background
October 19, 2023 9:25 am
The EUR/USD currency pair turned downward again during Wednesday and once more crossed the moving average line. Thus, the movements of the past two weeks seem to resemble a simple flat rather than an ascending correction. The market situation has become quite ambiguous. On the one hand, there’s a need for a new phase of an ascending correction. On the other hand, the market does not appear eager to get rid of the American currency or make new purchases. We believe that now is not the most favorable time for trading, as it seems the market itself has not yet determined its near-term direction.
In the current situation, a fundamental or macroeconomic background could help, but that is not happening. The problem lies in the following: among the fundamental events, we only have endless speeches from representatives of the ECB and the Fed. Both the ECB and Fed members increasingly talk about the lack of a need to raise the key interest rate. While we are accustomed to such rhetoric from the ECB, similar statements from Fed representatives appear unexpected.
The situation lies in the recent acceleration of inflation in the United States over the past three months. The Federal Reserve, known for its aggressive stance, had consistently conveyed its readiness to raise interest rates until inflation approached the target level. However, it now appears that the Fed is beginning to reverse its position. While the consumer price index continues to climb, Powell and his team are no longer discussing the necessity of further rate hikes but rather their absence. Consequently, the market is not anticipating any tightening in November, with the FedWatch tool indicating a mere 7% probability of a rate increase at the next meeting.
A closer look at the 24-hour chart unveils an intriguing scenario. The currency pair made an attempt to establish itself above the crucial line and the 38.2% Fibonacci level, but this endeavor fell short. This suggests that the market is either edging toward a flat pattern or a resumption of a downtrend.
In the European Union, inflation is on the decline, yet traders are currently unable to draw support or pressure from the macroeconomic backdrop. As we’ve previously highlighted, the most pivotal inflation reports that have been guiding trends for the past year and a half have now lost their significance. The European Central Bank, the Federal Reserve, and the Bank of England are all approaching their maximum interest rate levels. Consequently, the inflation trajectory has become largely irrelevant. The Fed, in particular, shows no inclination towards further tightening, despite a resurgence in inflation. Consequently, the recent second estimate of inflation in the EU, released yesterday, had no impact on market sentiment.
In summary, the market exhibits a reluctance to buy or sell the currency pair, and there’s a conspicuous absence of guidance from fundamental and macroeconomic factors. The trend line on the 4-hour chart is easily breached, and the Ichimoku indicator lines are disregarded. The current market condition appears to be one of chaos, with little reliance on the formation of reliable trading signals. We advocate exercising caution when initiating any trading positions, irrespective of your chosen trading system. In periods of market turmoil or flat movement, false signals tend to emerge. Furthermore, a continuation of the flat pattern is a possibility as it has been absent for a while.
The average volatility of the EUR/USD currency pair over the last 5 trading days as of October 19 is 73 points, characterized as “average.” Therefore, we expect the pair to move between the levels of 1.0459 and 1.0605 on Thursday. A reversal of the Heiken Ashi indicator back upwards will indicate a new phase of the ascending movement.
Nearest support levels:
S1 – 1.0498
S2 – 1.0376
S3 – 1.0254
Nearest resistance levels:
R1 – 1.0620
R2 – 1.0742
R3 – 1.0864
Trading recommendations:
The EUR/USD pair has settled back below the moving average. Currently, there is a high probability of a flat, so the price can easily cross the moving average in both directions. Each such crossing does not guarantee movement in the desired direction, not even by 50 points. We recommend approaching any trading signals with caution.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both are pointing in the same direction, it indicates a strong current trend.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should currently be conducted.
Murrey levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel in which the pair will trade over the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold region (below -250) or the overbought region (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 turned downward again during Wednesday and once more crossed the moving average line. Thus, the movements of the past two weeks seem to resemble a simple flat rather than an ascending correction. The market situation has become quite ambiguous. On the one hand, there’s a need for a new phase of an ascending correction. On the other hand, the market does not appear eager to get rid of the American currency or make new purchases. We believe that now is not the most favorable time for trading, as it seems the market itself has not yet determined its near-term direction.
In the current situation, a fundamental or macroeconomic background could help, but that is not happening. The problem lies in the following: among the fundamental events, we only have endless speeches from representatives of the ECB and the Fed. Both the ECB and Fed members increasingly talk about the lack of a need to raise the key interest rate. While we are accustomed to such rhetoric from the ECB, similar statements from Fed representatives appear unexpected.
The situation lies in the recent acceleration of inflation in the United States over the past three months. The Federal Reserve, known for its aggressive stance, had consistently conveyed its readiness to raise interest rates until inflation approached the target level. However, it now appears that the Fed is beginning to reverse its position. While the consumer price index continues to climb, Powell and his team are no longer discussing the necessity of further rate hikes but rather their absence. Consequently, the market is not anticipating any tightening in November, with the FedWatch tool indicating a mere 7% probability of a rate increase at the next meeting.
A closer look at the 24-hour chart unveils an intriguing scenario. The currency pair made an attempt to establish itself above the crucial line and the 38.2% Fibonacci level, but this endeavor fell short. This suggests that the market is either edging toward a flat pattern or a resumption of a downtrend.
In the European Union, inflation is on the decline, yet traders are currently unable to draw support or pressure from the macroeconomic backdrop. As we’ve previously highlighted, the most pivotal inflation reports that have been guiding trends for the past year and a half have now lost their significance. The European Central Bank, the Federal Reserve, and the Bank of England are all approaching their maximum interest rate levels. Consequently, the inflation trajectory has become largely irrelevant. The Fed, in particular, shows no inclination towards further tightening, despite a resurgence in inflation. Consequently, the recent second estimate of inflation in the EU, released yesterday, had no impact on market sentiment.
In summary, the market exhibits a reluctance to buy or sell the currency pair, and there’s a conspicuous absence of guidance from fundamental and macroeconomic factors. The trend line on the 4-hour chart is easily breached, and the Ichimoku indicator lines are disregarded. The current market condition appears to be one of chaos, with little reliance on the formation of reliable trading signals. We advocate exercising caution when initiating any trading positions, irrespective of your chosen trading system. In periods of market turmoil or flat movement, false signals tend to emerge. Furthermore, a continuation of the flat pattern is a possibility as it has been absent for a while.
The average volatility of the EUR/USD currency pair over the last 5 trading days as of October 19 is 73 points, characterized as “average.” Therefore, we expect the pair to move between the levels of 1.0459 and 1.0605 on Thursday. A reversal of the Heiken Ashi indicator back upwards will indicate a new phase of the ascending movement.
Nearest support levels:
S1 – 1.0498
S2 – 1.0376
S3 – 1.0254
Nearest resistance levels:
R1 – 1.0620
R2 – 1.0742
R3 – 1.0864
Trading recommendations:
The EUR/USD pair has settled back below the moving average. Currently, there is a high probability of a flat, so the price can easily cross the moving average in both directions. Each such crossing does not guarantee movement in the desired direction, not even by 50 points. We recommend approaching any trading signals with caution.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both are pointing in the same direction, it indicates a strong current trend.
Moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should currently be conducted.
Murrey levels – target levels for movements and corrections.
Volatility levels (red lines) – the probable price channel in which the pair will trade over the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold region (below -250) or the overbought region (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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