Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - upward.
The currency pair was trading quite uneasily on the first trading day of the new week. It seems that at the end of the past week, American market participants left it in advance. On Thursday, and yesterday, they began to work out all the things that they missed in those days. And they missed quite a lot. For example, macroeconomic statistics from the United States, the publication of which was specifically moved from Friday to Thursday to make Friday a day off in honor of Independence Day, which was officially scheduled for Saturday, July 4. We described the package of macroeconomic statistics from overseas as contradictory, as some reports turned out to be optimistic, however, recalling the fall of the same indicators in April-May, the current growth seems very weak. First of all, this applies to NonFarm Payrolls, which increased by as much as 4.8 million. However, two months earlier, this figure lost 11 million. The unemployment rate has fallen, however, it has fallen to 11.1%, which is a very high figure. Wages decreased by 1.2% compared to the previous month. Thus, in general, this package of statistics can be considered negative for the dollar, although at first glance it does not seem so. There are no other explanations for the growth of the European currency on Monday. However, we would also like to note that at this time, traders may pay increased attention to the "coronavirus" epidemic in the United States. Yes, that's the exact wording. If earlier it was a worldwide epidemic, now only a few countries of the world continue to update their anti-records for disease incidence daily. And the United States is in a confident first place on this sad indicator. Moreover, the situation is aggravated by the fact that the country's quarantine did not bear much fruit. The epidemic was only contained for a while, but after Donald Trump began to "open" the economy, after rallies and protests raged in the country for about a month, after Donald Trump himself began to ride around the country with his election rallies, the situation with the "coronavirus" immediately escalated and every day is now recorded 40-50 thousand new cases of the disease. And this means that the pandemic in the United States persists and it is bad from which side not to look. Even if there is no new "lockdown", it is still bad for the economy. Sick and scared people will not go to work, especially as long as the United States pays increased unemployment benefits. Businesses will continue to suffer, which again threatens to lose jobs and increase unemployment. People will not be socially active, as they realize that the COVID-2019 virus is not dormant. It is in Europe that the population has calmed down, the authorities have lifted the quarantine, since in most countries the incidence rates have fallen almost to zero, and new local outbreaks are immediately tracked and localized. In America, everything is different. In the worst case, the country will face a new quarantine. Some states have already imposed some restrictions since the virus is spreading at a very high rate.
From all this, we can draw a banal conclusion that the European economy is now not hindered by anything to begin to recover. Of course, it would be easier to do this if the European Parliament, the European Commission, and the European Council agreed on an additional package of assistance to the EU economy for 750 billion euros, however, this is not yet the case. But the European Union managed to defeat the "coronavirus" and stop its spread. Thus, it is the European economy that is now in a better position than the American one. And it is the euro currency that for the first time in many years has an advantage (albeit small) over the US dollar. We do not claim that the euro will now start a new long-term upward trend, however, the fundamental and macroeconomic advantage of the dollar has indeed been leveled in the past few months.
However, even in this advantageous position, the top officials of the European Union see high risks for the economy. Christine Lagarde and others have repeatedly said that a new wave of the epidemic can "finish off" the economy. European Council President Charles Michel said at the weekend at an economic forum that the EU will need years to reach pre-crisis levels. The head of the European Council said that from the first days of the pandemic, all political decisions were made through the prism of the health and life of Europeans. The main goal was to stop the spread of the virus. The EU has loosened some levers and principles for all EU member states to make it easier for them to deal with the epidemic at the national level. However, over time, it turned out that not all EU countries were ready for a pandemic crisis and showed equal opportunities to overcome the consequences. "Economic growth does not have an automatic magic power. Inequality and injustice not only sow frustration but also create obstacles to prosperity. Reducing inequality increases the stability of the economy, " said the President of the European Council. Thus, said Charles Michel, the European Union has chosen the right path: by 2050, the EU plans to reorient itself to a "green" economy, switch to digital technologies, and reduce inequality between members of the alliance.
On Monday, July 6, the European Union published a report on retail sales for May. It turned out that this indicator increased by 17.8% in monthly terms, and lost 5.1% in annual terms. These figures were significantly better than the forecast values and could also support buyers of the European currency a little. However, we believe that traders generally continue to ignore macroeconomic statistics, at least not as important as was published in the United States at the end of last week. Today, on July 7, in the European Union, Germany is scheduled to publish also not the most significant indicator of industrial production. It is expected that in the country - the locomotive of the European economy by the end of May, production will decrease by 11.1% in annual terms and add 10% monthly. On the other hand, according to Christine Lagarde, the speed of recovery of the European economy will depend on the recovery of production. Thus, this indicator is important, although it is unlikely to cause a momentary reaction. In general, the euro/dollar currency pair again reached the Murray level of "5/8"-1.1353 and continues to remain, thus, inside the side channel, in which it has been trading for almost a month. The level of 1.1353 is just its upper limit. If traders manage to overcome it, the upward movement may resume. Otherwise, the pair will try to return to around $ 1.12.
The volatility of the euro/dollar currency pair as of July 7 is 76 points and is characterized as "average". We expect the pair to move between the levels of 1.1235 and 1.1387 today. A new reversal of the Heiken Ashi indicator downwards will signal a new round of downward movement within the side channel.
Nearest support levels:
S1 – 1.1230
S2 – 1.1108
S3 – 1.0986
Nearest resistance levels:
R1 – 1.1353
R2 – 1.1475
R3 – 1.1597
The euro/dollar pair continues to trade near the moving average line, inside the side channel. Thus, at this time, it is recommended to trade down if traders manage to overcome the level of 1.1175, which is the approximate lower limit of the channel, with the goals of 1.1108 and 1.0986. It is recommended to open buy orders no earlier than the Murray level of "5/8"-1.1353 with a target of 1.1475.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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