4-hour timeframe
Technical data:
The upper channel of linear regression: direction – up.
The lower channel of linear regression: direction – down.
The moving average (20; smoothed) – down.
CCI: 43.1500
Although in America there was no publication of macroeconomic data that could interest traders, it was in the US trading session that the US dollar began to fall against both the euro and the pound. We still believe that the euro/dollar remains hostage to the "paradoxical situation" in which further sale of the euro currency requires a strong fundamental background, and purchases of the pair do not have any good reasons and grounds, neither technical nor fundamental. The more interesting it will be to watch the currency pair today when it came close to the moving average line. Now either the retreat from the moving or overcoming it. The first option can lower the quotes a little lower, for example to the Murray level of "3/8" - 1.0925. The second is to provoke the beginning of an upward movement, which is unlikely to be strong. Anyway, traders are advised to wait for clarification of the situation near the moving average line.
One possible reason for yesterday's decline in the US currency may be the speech of Jerome Powell, the Fed chairman to the Congressional Budget Committee. Although Powell did not report anything "dovish" or simply disappointing, it was his performance that could provoke a small drop in the dollar. According to many experts, Jerome Powell openly went beyond his jurisdiction at the speech. Firstly, the head of the Fed seems to have finally remembered that his organization is not subject to Donald Trump and almost openly stated that shortly there will be no new cuts in the key rate. Secondly, Powell recalled that the huge US debt continues to grow, and the federal budget is not on the right track. Over time, Powell believes this could prevent the government from supporting the economy if, for example, there is a period of recession. It is expected that in 2020, the States will pass the historical mark – more than 1 trillion of public debt. Although the national debt is growing continuously, it is with Donald Trump that he is tied up, as the US president made tax breaks. Jerome Powell should not be concerned about public debt. This is the field of activity of the Minister of Finance Steven Mnuchin, whom Trump, by the way, has never criticized. Immediately, there was speculation that Powell was tired of hearing criticism from the American president and he began to respond to it. If before, Powell simply did not pay much attention to Trump's angry messages on social networks, now he began to carry out retaliatory attacks, trying to explain that the possible recession is not the fault of the Fed.
It is difficult to imagine how this information can affect the US dollar in the longer term than one day. Thus, we recommend paying more attention to macroeconomic reports from the European Union and the United States, which are again present in the news calendar today. In the first half of the day, an extremely important report on inflation in the European Union will be released, which we assume that the indicator will not change compared to the previous period and will be 0.7% y/y. In the second half of the day, US retail sales for October will be published, which may add 0.2% m/m. Of course, the key report of the day will be inflation in the EU, which, if it shows signs of slowing down again, the euro currency can very quickly resume its downward trend. At the same time, the volatility of the euro/dollar pair remains quite low, which should be taken into account.
Nearest support levels:
S1 – 1.0986
S2 – 1.0925
S3 – 1.0864
Nearest resistance levels:
R1 – 1.1047
R2 – 1.1108
R3 – 1.1169
Trading recommendations:
The euro/dollar pair began to adjust against the downward trend. Thus, it is now recommended to wait for the completion of the correction and resume selling the euro currency with the targets of 1.0986 and 1.0925 levels. Volatility remains low at this time and is likely to remain so, despite the rather important reports today. The pair's purchases will now formally become relevant with a target of 1.1108 if the bulls manage to overcome not only the moving but also the Murray level of "5/8" - 1.1047.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustrations:
The upper channel of linear regression – the blue line of the unidirectional movement.
The lower channel of linear regression – the purple line of the unidirectional movement.
CCI – the blue line in the indicator window.
The moving average (20; smoothed) – the blue line on the price chart.
Support and resistance – the red horizontal lines.
Heiken Ashi – an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
