4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -113.3358
The EUR/USD currency pair continued its downward movement on Wednesday, February 3, according to the trend that developed in the first month of 2021. At the moment, market participants have abandoned purchases of the European currency and sales of the American currency, which they have been doing in the last 10 months. On the one hand, this is logical, and we have long expected at least a tangible downward correction. On the other hand, the question arises: is this the end of the euro's upward trend, or will we see a new move to the North after the current correction is completed? Few people can answer this question, however, we remind you that we have at our disposal a couple of factors that most affect the movement of the euro/dollar pair at this time. These are the factors of the "balance of forces of the American and European economies" and the "stimulus package for the American economy". In short, we believe that if the US Congress approves the provision of a new stimulus package to the US economy, which is likely to be at least $ 1 trillion, the US currency rate may again rush down, as this will mean another flood of the economy with freshly printed dollars. For the benefit of the American currency, so far Joe Biden's "plan to save America" has been stuck in Congress, as Republicans and Democrats have shown an amazing capacity for diplomacy over the past year. Thus, the US currency has a few more weeks or even months to grow. During this time, the pair can properly adjust and prepare for a new upward trend.
In the meantime, nothing interesting is happening in the United States (which could affect the dollar exchange rate). We suggest focusing on the new president and the results of his activities in the first two weeks. Joe Biden almost at his first appearance in the Oval Office began to cancel the decrees that were adopted by Donald Trump. The most important and significant – the return of the United States in the Paris agreement and the return of the US to the WHO. As time goes on, Joe Biden continues to reverse Donald Trump's directives. On February 2, Biden signed several executive orders that weaken the tough immigration policies that existed under Trump. According to Biden, the former president was overly focused on building a wall on the border with Mexico and at the same time did nothing to eliminate the reasons for people coming to the border with the United States. "I don't create new laws, I eliminate failed policies. 99% of the executive orders that the last US president signed are counterproductive to our security and the country, " Joe Biden said. The new decrees will allow immigrant families to be reunited.
At the same time, the American media is analyzing the first two weeks of the new president's work. And they note that the new president turned out to be a very determined person, despite the ridicule of Donald Trump during the election race (Trump called Biden "sleepy Joe", alluding to his lethargy, drowsiness, and slowness). According to The Washington Post, the first two weeks surprised both Democrats and Republicans. Every day the White House initiates new decrees, bills, or appointments, that is, the work is in full swing, and the new president is busy with his direct duties, and not posting provocative messages in social networks or hourly speeches. However, experts also believe that the clarity and order of Biden's actions are normal for the president, it just looks quite unusual now after the showman president Trump. Also, many experts note Biden's calmness, the inability to provoke him, as well as his unwillingness to get involved in those issues in which he can not influence anything. For example, Biden does not criticize Trump and rarely utters his name. He does not condemn Trump for not coming to the inauguration, nor does he say much about his impeachment, which will be considered in the Senate next week. Biden and his team are fully focused on the work and set themselves two main tasks for the near future - to support the economy and vaccinate the population of the country. The Washington Post also notes the strength of Biden's team, who help their president and are professionals. In general, so far, Biden and his team look much more preferable than the previous president and his team.
Meanwhile, politics is politics. However, you should not forget about the economy. The US dollar is now continuing to recover, as is the US economy. And the latest GDP reports in the European Union and the United States showed that the US economy will have the advantage in the fourth quarter. American GDP will grow by about 4%, while European GDP will fall by about 1%. Thus, the peak that was reached on January 6 may remain the peak for the European currency for the coming years. If the US economy continues to recover at the same pace, it will recover to pre-crisis levels even faster than the European one, which at first was hard to believe, since European GDP shrank at the height of the pandemic three times less than the American one. Only one thing can prevent the dollar from continuing to grow in the long term – the injection of a couple more trillions of dollars into the US economy from the Treasury and the Fed. However, it should also be understood that when we talk about the strength or weakness of the dollar, it does not mean that a rising dollar is good, and a falling dollar is bad. For America, on the contrary, a falling dollar is just fine. Because the cheaper the dollar, the more competitive American goods become on world markets. The cheaper the dollar, the easier it is for the government to service the national debt, which is already near the 30 trillion mark. It is unlikely that the government is going to inject another couple of trillions into the economy to lower the exchange rate of the national currency. This step will be aimed at saving the economy. But at the same time, it will also have a positive impact on the US dollar.
The volatility of the euro/dollar currency pair as of February 4 is 65 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1962 and 1.2092. A reversal of the Heiken Ashi indicator to the top can signal a round of upward correction.
Nearest support levels:
S1 – 1.2024
S2 – 1.1963
S3 – 1.1902
Nearest resistance levels:
R1 – 1.2085
R2 – 1.2146
R3 – 1.2207
Trading Recommendations:
The EUR/USD pair continues its downward movement. Thus, today it is recommended to trade downwards with the targets of the levels of 1.1963 and 1.1902 before the reversal of the Heiken Ashi indicator to the top. It is recommended to consider buy orders if the pair is fixed back above the moving average with targets of 1.2146 and 1.2207.
