When there is consolidation in the "bull market", you involuntarily ask yourself the question: have we encountered the accumulation of long positions or with the distribution of short positions? The events of the second week of April demonstrate that buyers of the EUR/USD are still confident in their abilities. They were able to withstand the "hawkish" rhetoric of the Fed, the dispersal of US inflation and even the ECB's fears of a trade war, Brexit and a strong euro. Every time the negative was perceived by fans of the single European currency as an excuse for buying on the decline of quotations. Everyone knows: when the crowd sells, the big players have a great opportunity to form longs.

The exchange rate of any currency is determined by the flows of trade and non-trading capital. If the US manages to persuade China to reduce the negative balance of mutual trade, it will become a bullish factor for the dollar. However, while the indicator continues to expand: according to the results of the first quarter, according to the data of Chinese statistics, the deficit grew by 19.4% and reached the level of $ 58.25 billion.

Financial flows are more mobile and voluminous, so the currencies are more sensitive to them. At first glance, interest rates on US bonds look more attractive than their European counterparts, but one should take into account that the cost of hedging dollar assets fluctuates near the 2.5% mark. As a result, in order to make investments in 10-year US Treasuries more profitable than investments in their German counterparts, the rates on them should exceed 3%. While this is not there, money will flow into the Eurozone.

The situation in the stock market does not look any better for the dollar. As the probability of four hikes in the federal funds rate increases, US stock indices are adjusted. This leads to an outflow of capital. After a swift rally over the past few years, the S&P 500 looks overvalued and loses to the German DAX and the Japanese Nikkei.

Dynamics of the S&P 500 and the spread of the Fed's expected rates

Thus, at present, the United States is facing an outflow of trade and non-trading capital. In order to resist it, the US administration needs a weak dollar. It will improve the position of exporters and simultaneously make treasury bonds cheaper for foreign investors. The problem is very acute, since, according to the forecasts of the Congressional Budget Office, the budget deficit will exceed $1 trillion by 2020.

The euro can not yet take advantage of the weakness of its main competitor because of its own problems. Weak data on industrial production, business activity and retail sales indicate a slowdown in the euro area's GDP in the first quarter. In such circumstances, the ECB remains committed to ultra-soft monetary policy. The divergence contributes to the consolidation of the EUR/USD in the trading range of 1,215-1,255.

Technically, on the daily chart of the main currency pair, the "Broadening Wedges" pattern is still relevant. The recovery of an uptrend can be said only if the resistance is successfully tested at 1.247 and 1.2515.

EUR/USD, daily chart