4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -37.1637
The EUR/USD currency pair continued to trade in a calm mode on Tuesday. In principle, this does not surprise anyone at all. The illustration below does not even show that the volatility of the euro/dollar pair has seriously decreased because it has been declining continuously for the last six months. The chart below shows data only for the last 30 working days. Thus, it may seem that the current 30-40 points per day are normal for the euro/dollar pair. However, we remind you that this is not normal, and in the last few months, it isn't easy to trade the pair. Therefore, no matter how banal it may sound, you need to wait for the volatility to increase and the movements to become stronger. Or the second option: you need to increase the period of maintaining the open of each trade transaction. Earlier, according to the "Linear Regression Channels" system, a transaction could be kept open for an average of a day or two. Now we are talking about three or four days. The problem is that even during trend segments, corrections and pullbacks still occur, which offer traders to exit the market. That is why low volatility is the enemy of traders simply because the pair do not have time to go in one direction before the start of the next correction or rollback so much that you can earn money on this movement.
In general, the technical and fundamental picture has not changed at all in recent months. The pair is still located between the 17 and 23 levels in the long term. Moreover, in the short term, it continues to form trends between these levels. We still expect that the global upward trend will be resumed, within which the quotes will go significantly above the level of 1.2340. However, it is still very difficult to count on this, simply because the price will go to this level for a couple of months, at least, if the nature of the movement does not change. And why should it change? If the markets have reduced their activity so much, then they had certain reasons for this. Perhaps we are even talking about global market mechanisms that have caused a drop in activity. Anyway, it is unlikely that the volatility will now recover to its previous values in a couple of weeks. Therefore, either some fundamental global changes are required, or global technical ones.
What do we mean by "fundamental global changes"? The first thing that comes to mind is the tightening of the Fed's monetary policy. In the last couple of weeks, it has become clear that the probability of announcing the beginning of the curtailment of the QE program in September has greatly decreased. In his speech in Jackson Hole, Jerome Powell made it clear that he was not going to force things, and the latest Nonfarm report showed a slowdown in the pace of the labor market recovery. Now it remains only to wait for the inflation report for August, which will be published on September 14. At the moment, there are no official forecasts for this indicator yet, but it can be noted that the rate of inflation growth has begun to slow down, and at the moment, the consumer price index is 5.4% y/y. There is every reason to assume that it will decrease by the end of August. And this, in turn, will mean that the Fed will have fewer reasons to rush to curtail the QE program. Thus, the US dollar currently has no grounds for strengthening at all. However, do not forget that in the last 8-9 months, the euro/dollar pair is in a flat or a side channel. Therefore, in any case, it cannot be concluded that one of the currencies now has any advantage.
What do we mean by "global technical changes"? Everything is even easier here. At this time, an upward trend is maintained on the 24-hour timeframe. Even the fact that the pair's quotes have not updated their highs in the last 8-9 months does not end the prospects of this trend. Therefore, we need clear signals that this trend is over. They are needed to conclude the end of the upward trend and build a new trading strategy for the coming months. And for this, it is necessary that the pair's quotes confidently go below the level of 1.1700. Given that the last round of the upward movement began just from the 17th level, and it took 2.5 weeks for the pair to pass 200 points up, we do not expect any global technical changes in the near future.
The volatility of the euro/dollar currency pair as of September 8 is 44 points and is characterized as "low." Thus, we expect the pair to move today between the levels of 1.1800 and 1.1888. The upward reversal of the Heiken Ashi indicator signals a possible resumption of the upward movement.
Nearest support levels:
S1 – 1.1841
S2 – 1.1810
S3 – 1.1780
Nearest resistance levels:
R1 – 1.1871
R2 – 1.1902
R3 – 1.1932
Trading recommendations:
The EUR/USD pair continues to adjust. Thus, today, we should consider new long positions with targets of 1.1888 and 1.1902 in the event of a price rebound from the moving average. Sales of the pair will be possible if the pair is fixed below the moving average line with targets of 1.1810 and 1.1800, and they should be kept open until the Heiken Ashi indicator turns up.
