Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - upward.
The EUR/USD currency pair continued its upward movement on Wednesday, although the pound was falling at the same time. Thus, the correlation between the two main pairs is now completely absent and this makes us think very seriously about what is happening in the foreign exchange market. The most interesting thing is that everything is not good in the European Union right now, and this is obvious to anyone. And in the UK, everything has been bad for a long time, and this is also obvious to anyone. But why is there now a de-correlation of the main pairs? We believe that everything is going according to plan for the euro currency. Recall that we have repeatedly stated that the entire downward movement in 2021 is nothing more than a correction against the upward trend that was observed for most of 2020. Thus, the overall decline in the euro currency quotes by 640 points (from the maximum to the minimum) is a correction in global terms. According to this assumption, after the correction is completed, the main trend should resume, which we are now observing. Thus, we can even assume that the fundamental or macroeconomic background has nothing to do with it now. The euro is rising because the markets are once again tuning in to buy it. Or the second version: the dollar is declining again because trillions of dollars in stimulus programs have begun to flow into the American economy. Therefore, participants of the foreign exchange market are not selling dollars for euros now. However, the money supply in the US is inflated, which leads to a fall in the dollar banal due to the growth of its supply in the foreign exchange market. Now for the pound. We noted earlier that the pound adjusted very weakly in 2021. The size of the correction does not correspond to the size of the upward trend preceding it. Moreover, the upward trend itself was very strong, which suggests that it is unfounded. We have already assumed that the pound may be influenced by a "speculative" factor. Therefore, if we assume that speculators have now started to leave the market, then the pound based on this factor may continue to fall since the correction against the upward trend is too small. We believe that this is the most likely explanation for what is happening.
Meanwhile, as soon as US Treasury Secretary Janet Yellen proposed to introduce a single corporate tax to all countries of the world, she was immediately supported by the International Monetary Fund. Chief Economist Gita Gopinath said the IMF had long considered introducing such a tax. However, Ms. Gopinath believes that this will help in the fight against tax evasion, which is a serious problem for the global economy. Strangely, Janet Yellen and the IMF think it is right to speak out about what is good for the world economy and what is not. Perhaps it is better to say that it benefits the US and the IMF? After all, Janet Yellen came up with this initiative exactly at the time when Joe Biden proposed raising the income tax for large companies from 21% to 28%, to have an additional source of funding for his new stimulus package and inflate the national debt even more. Thus, in the United States, they are now very afraid that a new outflow of companies and industries from the country abroad will begin. Moreover, the world is full of countries where there are minimal taxes or they do not exist at all. The media reports that the United States is already negotiating with the G20 countries on this issue. According to Janet Yellen, governments should receive enough money to invest in public goods. "Competition should not only manifest itself in the confrontation of American companies with others," Yellen said. "It is important that every citizen fairly shares the tax burden," the US Treasury Secretary said. Experts believe that if it is possible to agree on the introduction of a single corporate tax, the risk of American companies leaving the United States will significantly decrease. Thus, all this is not done for the sake of global justice and out of concern about filling the budgets of other countries. This is all done so that the US budget does not start losing even more money due to the outflow of capital abroad, to more tax-loyal states. Ms. Gita Gopinath also believes that different corporate tax rates in different states lead to companies registering where taxes are lowest, thus depriving the state of income that is necessary for social needs. According to Janet Yellen, all countries of the world have been actively reducing corporate tax in the last 30 years to attract large corporations to their territory. Now, Yellen believes that it is time to put an end to this.
From our point of view, this initiative is bound to fail. This is the essence of international competition at the level of various states. Why should states that can attract multi-corporations to their territory at the expense of low taxes abandon their policies, if they objectively have much fewer sources of budget replenishment than the United States? Why should other countries in the world support Janet Yellen when the United States needs it? Thus, Yellen's proposal looks extremely unconvincing. It is completely unclear why China or Russia should go along with Washington, given that they are constantly called the main enemies of America? Strangely, this initiative was also supported by the head of Amazon, Jeff Bezos. However, everything can be very simple. Amazon practically does not produce goods, so in any case, its business is concentrated in the United States and the company will pay American taxes. While some companies have the opportunity to transfer part of their activities abroad and, accordingly, pay taxes in other countries, where they are objectively lower.
The volatility of the euro/dollar currency pair as of April 8 is 65 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1816 and 1.1946. The reversal of the Heiken Ashi indicator downwards signals a possible round of a downward correction.
Nearest support levels:
S1 – 1.1841
S2 – 1.1780
S3 – 1.1719
Nearest resistance levels:
R1 – 1.1902
R2 – 1.1963
R3 – 1.2024
The EUR/USD pair continues a rather strong upward movement. Thus, today it is recommended to stay in long positions with targets of 1.1902 and 1.1946 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair is fixed back below the moving average line with targets of 1.1780 and 1.1719.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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