4-hour timeframe

Technical details:

Higher linear regression channel: direction - downward.

Lower linear regression channel: direction - downward.

Moving average (20; smoothed) - downward.

CCI: -129.6355

The EUR/USD currency pair resumed its downward movement on Tuesday, July 13. However, it only fixed below the moving average line, which again changes the current trend to a downward one. All the movements of the last weeks and even months can be divided into two types. The first type is movements that were triggered by strong macroeconomic statistics or fundamental events (15-20% of the total number of days). The second type is almost flat - weak movements, often mainly sideways or with a minimal slope up or down, which does not even matter (80-85% of days). Thus, most of the time, the currency pair spends in a very limited trading range, which also changes every day. Roughly speaking, there is no flat now, since the downward trend is visible. But the movements of the pair are so weak that it is extremely difficult to extract profit from them. The price is constantly being adjusted, the movements are weak, and macroeconomic statistics are often simply ignored. It seems that market participants are trading now just for show and are waiting for something global. In principle, traders now have enough reasons for both tradings on a decline and trading on an increase. We should not forget that the global technical factor continues to predict a decline in quotes to the area of the 17th level within the framework of a round of corrective movement. And the global fundamental factor continues to predict the resumption of the global upward trend for the pair, as a huge amount of money continues to pour into the American economy, inflating the money supply to an exorbitant size and provoking an increase in inflation. Thus, the pair could now easily and simply rush to the level of 1.1700 or take a course to the 21 and 22 levels. However, instead, it continues to tread on one place. The illustration below shows that the absolute majority of the last 30 working days ended with volatility below 60 points. It is especially true for the last three weeks. Thus, when trading intraday, the maximum that traders can now count on is 20-30 points of profit.

Let's briefly run through the main opinions and theses that are currently available on the foreign exchange market to understand what most traders are guided by when making trading decisions. Of course, the key opinion of many traders now reflects the position of the Fed, which was voiced at the last meeting by Jerome Powell. He said that the Fed may start discussing the curtailment of the quantitative stimulus program in the near future. Most traders regarded this information almost as an increase in the key rate, immediately by 0.50%. However, in reality, the American regulator has not even started discussing anything yet. However, at this time, it is generally believed that the rhetoric of the US central bank has become more "hawkish". Thus, the US dollar continues to grow slowly.

The American economy is recovering very quickly. This opinion is also true since the US GDP is growing much faster than in the European Union or the UK. However, we remind you at what cost it is possible to achieve this growth in the United States. At the cost of pouring trillions of dollars into their economy. At the cost of inflating the national debt to 30 trillion. At the cost of creating an imbalance in the economy. At the cost of inflating the "bubble" in the stock market. Roughly speaking, almost always the printing of money by the central bank is like a dishonest game. It is not real economic growth. Thus, judging by the figures, the growth of the American economy is there. However, in reality, it may not look as powerful as on paper. A simple example: the stock market has almost doubled during the pandemic. And why? Because the Fed and the US authorities poured tons of money into the economy, which eventually settled on the stock market and the cryptocurrency market. Now bitcoin is going through hard times, so the funds that investors took out of cryptocurrencies also migrated to the stock market. That is why the key US stock indices continue to grow. That is why the shares of Apple and Microsoft continue to grow. After all, there is a very simple logic here. These indices and companies are growing not because the demand for their shares is growing, but because Americans have more money that needs to be spent somewhere so that they are not eaten up by inflation and they invest in the stock market. That's all.

Thus, from our point of view, the further strengthening of the US dollar continues to be a big question. The problem is that the economic growth in the US is now too artificial. Debts are growing, inflation is rising, the labor market is not recovering at the pace that we would like to see. Therefore, we continue to believe that the global upward trend in the euro/dollar will resume in the medium term. At least, now it is extremely difficult to find real reasons for the continued growth of the US dollar.

Although, from a technical point of view, almost all indicators now signal a downward trend. Both linear regression channels are directed downwards. The price spends most of the time below the moving average line. However, we still strongly doubt the ability of the dollar to continue growing below the 17 levels. Interestingly, yesterday, a report was published on American inflation, which rose to 5.4%, continuing to shock investors. After all, the Fed promised that the acceleration of inflation is a temporary phenomenon. However, as practice shows, it may be temporary, but at the same time, inflation can grow to such values that it will be very difficult to "lower it from heaven". After such a strong increase in consumer prices, it is necessary to wait for comments from representatives of the Fed and personally Jerome Powell. Oddly enough, the dollar rose in price after the publication of inflation.

The volatility of the euro/dollar currency pair as of July 14 is 67 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1721 and 1.1855. A reversal of the Heiken Ashi indicator to the top will signal a new round of upward movement.

Nearest support levels:

S1 – 1.1780

S2 – 1.1719

S3 – 1.1658

Nearest resistance levels:

R1 – 1.1841

R2 – 1.1902

R3 – 1.1963

Trading recommendations:

The EUR/USD pair has again overcome the moving average and will try to continue its downward movement. Thus, it is recommended to stay in short positions with a target of 1.1719 until the Heiken Ashi indicator turns up. It is recommended to open buy orders now no earlier than fixing the price above the moving average line with the targets of 1.1902 and 1.1963.