4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: 17.2729
On Thursday, June 10, the EUR/USD currency pair again traded very calmly for most of the day. Until about 12:30 GMT, when Christine Lagarde's speech began, and US inflation was published. However, we will talk about this below. In the meantime, I would like to say that the euro/dollar pair remains within a limited price range despite the extremely important events of the past day. Even yesterday's events could not bring it out of the approximate channel of 1.2110-1.2260. Of course, this channel can not be called clear and lateral. The pair have had a minimal downward bias in recent weeks.
However, all this movement does not even fall under the definition of "correction." The quotes moved away from their local highs by 160 points, and that's all. Thus, in global terms, the technical picture has not changed at all. It is what we've been talking about lately. All macroeconomic events can affect the movement of the pair. Global factors, the global mood of the markets, and the direction of the trend do not change from them. We once again draw traders' attention to the fact that American statistics are much better than European ones. It is explained very simply: the American economy is recovering from the crisis faster than the European one. It is not surprising that all its macroeconomic indicators are higher than European ones.
Nevertheless, if we talk about the exchange rates of national currencies, the European currency has been rising in price for 15 months. Why is this so? If we do not even consider the end of the global downward trend in 2017, then fundamental global factors remain on the side of the euro currency. The Fed and the US Treasury continue to saturate the economy with hundreds of billions of dollars and have not yet given any signals that this process will end in the near future. Thus, the money supply in the US continues to inflate, and this factor is multiplied by high inflation, which has accelerated to 5%. All this leads to a long-term fall in the dollar, and in the short-term - to the inability of the US currency to rise in price at least a little.
After the publication of yesterday's report on inflation in the United States, the US currency began to fall again. And this is a logical phenomenon since inflation in general, no matter what goals the Fed sets for itself, is a negative moment for the economy. And even more so for the national currency. Therefore, when traders learned that the consumer price index rose to 5.0%, naturally, they began to sell off the US currency. After an hour, the movement changed to a downward one. However, this does not change the essence of the matter. In addition to inflation, there was another important event on Thursday that deserves consideration. However, there is not much to consider. The next ECB meeting passed without surprises, as most experts expected. The ECB's key rate remained at 0%, while the deposit rate remained at -0.5%. The accompanying monetary policy statement said that key rates would stay at the current or lower level until the medium term's inflation rate reaches a stable 2%. In addition, the regulator announced the continuation of the Eurobond purchase program under the PEPP program for a total of 1.85 trillion euros. The final communique stated that the ECB would continue to buy bonds every month until at least the end of March 2022, or until it was decided that the "coronavirus crisis" was over. In addition, the ECB also clarified that in the next quarter, purchases of bonds would be made at a higher rate than in recent months, explaining the need to implement a flexible approach in this matter. The ECB also noted that it does not want to tighten the financing conditions, which will put pressure on inflation. Reinvestment of income on purchased securities will be carried out until the end of 2023. In addition, the ECB announced its intention to maintain the current pace of asset repurchases under the APP program (regular QE) for 20 billion euros per month. Reinvestment on these securities will continue for a long time, even after the start of the rate hike cycle. The communique also stressed that the ECB reserves the right to change the monetary policy parameters to achieve the target level of inflation.
Thus, the only thing that the ECB changed during the last meeting was to increase the pace of asset repurchases from the open market. This factor can be considered "bearish," although it does not matter much at what pace the ECB will buy up. There is a total volume of the PEPP program, and so far, there is no talk of changing or increasing it. Also, the ECB has not hinted in any way that the stimulus programs may end in the near future, which means it sends a signal to the markets that the EU economy is still too weak and still needs help from the central bank. In principle, we expected exactly such results. No one expected the ECB to even hint at a tightening monetary policy, given that GDP declined in the fourth and first quarters.
Moreover, we do not expect any hints on curtailing the stimulus program until the end of 2021. Inflation in the European Union has reached the target value for the first month. For the ECB to recognize the level of inflation as satisfactory, it is necessary that at least for 6-8 months, inflation is at least 2%. And this may already be a problem, as Christine Lagarde has repeatedly stated that the current surge in inflation may be temporary due to rising energy prices and a low base.
The volatility of the euro/dollar currency pair as of June 11 is 54 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.2122 and 1.2230. A reversal of the Heiken Ashi indicator back downward will signal a new round of downward movement within the flat.
Nearest support levels:
S1 – 1.2146
S2 – 1.2085
S3 – 1.2024
Nearest resistance levels:
R1 – 1.2207
R2 – 1.2268
R3 – 1.2329
Trading recommendations:
The EUR/USD pair has started a new round of upward movement. Thus, today it is recommended to open new short positions with a target of 1.2122 if the Heiken Ashi indicator turns down. It is recommended to consider buy orders not earlier than a new reversal of the Heiken Ashi indicator to the top with the targets of 1.2207 and 1.2230. The pair continues to be in a flat, which should be considered when opening any positions. We also give recommendations for trading on lower timeframes.
