In the last four weeks, the European currency has stayed mostly unchanged against the US dollar. Of course, there is a slight turn to the downside. Yet, this turn is so small that it can hardly be called a correction. Over the past three weeks, the price has moved only 150 pips away from its local highs, which is a very slow movement. In general, the volatility leaves much to be desired in recent weeks. There was almost no volatility in the first three days of the last week. The important economic data came out on Thursday. However, despite sharp reversals during the day and rapid price movements, the volatility was only within 50 pips. On the contrary, on Friday, the pair showed the most volatile movement of the week, dropping by nearly 80 pips although there were no reports released in the EU or the US. So, the expression "by fits and starts" is the best description of what is happening to the euro/dollar pair since the greenback's movement is unstable. Of course, market players can increase the number of short positions on the European currency at any time. For example, this is exactly what the latest COT report has signaled. However, the increase in short positions must be considerable in order to change the uptrend to a downtrend. In addition, we would like to remind you that a new global uptrend has just begun. It presumably continues for 4 years. Therefore, it is still far from being completed. That is why traders may still count on a new strengthening of the euro. Of course, we should not forget about the main fundamental factor that continues to put pressure on the American currency. That is, the injection of trillions of dollars into the US economy. We mention this factor quite often because it has a big influence on the pair. From our point of view, the US dollar will see no improvements as long as the Fed and the US Treasury continue to saturate their economy with trillions of dollars. Notably, the greenback is depreciating not only in the international currency market but also within its own country. We are talking about 5% inflation that was recorded in May. As for the macroeconomic statistics, market participants tend to downplay some of the data. A week ago, there was a really strong market reaction to the ADP and NonFarm Payrolls reports. However, this week, the inflation report did not cause such an active response. So, the macroeconomic data seems to have a local effect and then not in all the cases.
Only a few macroeconomic events are planned in the European Union next week. These are reports on industrial production and inflation. The data on industrial production has not had a significant impact on traders' sentiment for a long time. On the other hand, inflation can affect the euro's trajectory. This report will be published on Thursday. Christine Lagarde may also make a statement during the week although it is not in the economic calendar yet. However, this data may appear within a week. All macroeconomic statistics from overseas will be discussed in the article on the pound/dollar pair. So, what will be in focus next week? First of all, it is worth considering the lowest time frames. We publish our analysis and give trading recommendations every day. Lower time frames seem more useful at the moment as price movements are generally weak and there is simply no trend. Therefore, it is best to track changes on higher time frames but open short-term positions on lower ones. From the fundamental point of view, there is nothing to focus on at the moment. It is true that the world is actively discussing the topic of raising taxes in the United States for the rich and corporations as well as the introduction of a global minimum corporate tax. Also, the European Union is expected to start distributing the 750 billion Recovery Fund this summer which may help the EU economy to recover faster. However, all these topics will be reflected later in specific macroeconomic indicators. These topics are not shocking or critical and cannot agitate the markets and throw them into panic like it happened a year ago with the coronavirus pandemic. These are just the economic topics to discuss. Therefore, we largely expect the resumption of an uptrend. Do not forget that any fundamental hypothesis requires confirmation by particular technical signals. We also remind you that on the 4-hour time frame and above, the pair has been trading within a narrow range with a slight downward turn for already a month.
Trading tips for EUR/USD:
On the 4-hour chart, the technical picture for EUR/USD is quite clear. The movement is mostly weak with a slight downward turn. This downward movement is clearly seen as each subsequent low is located lower than the previous one, and each subsequent high is also lower than the previous one. However, this is not a trend movement. Now the price has dropped to the support level of 1.2095 which almost coincides with the previous local low. At the same time, it nearly coincides with the estimated lower boundary of the range in which the price has been holding for a month (1.2110 - 1.2260). Thus, next week there is a high probability of a new upward reversal. So, a movement of 100-150 pips is expected on Monday, Tuesday, and Wednesday.
On the chart:
Support and resistance levels serve as targets when opening buy or sell positons. You can place a Take Profit near them.
Indicators: Ichimoku Cloud, Bollinger Bands, MACD.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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