Higher linear regression channel: direction – downward.
Lower linear regression channel: direction – downward.
Moving average (20; smoothed) – sideways.
The first trading day of the week ended with an unexpected increase in the European currency. From a fundamental point of view, it is unexpected. No important macroeconomic reports were scheduled for Monday, however, market participants still found reasons to buy the euro at the US trading session. We do not believe that the “coronavirus” can be the reason for the fall of the US currency. Otherwise, the US dollar would have become more expensive much earlier, when the epidemic was spreading only in China and the fears of the Chinese authorities were extremely strong. It can not be said that the US dollar reacts negatively to the spread of the Chinese pneumonia virus when the following occurred: (1) it is known that several tens of thousands recovered from the virus; (2) it became known that the virus is not so terrible; (3) 80-90% of cases are completely curable. The defeat of Angela Merkel’s party in the local elections in Hamburg was also unlikely to support the British currency. Or information that a new chairman of the Christian Democratic Union will be elected on April 25. Thus, we believe that the main reason for the strengthening of the euro is technical. That is, the same banal need to form an upward correction against the three-week fall of the pair. Based on this, we believe that the correction may continue this week. However, it is unlikely to be strong and fast, given the average volatility of the euro/dollar.
From a fundamental point of view, you can only pay attention to the report on German GDP for the fourth quarter today. According to experts, +0.4% in annual terms is expected and 0.0% in quarterly terms. Previous publications of this indicator were exactly the same. Therefore, if the forecast and real values coincide, the reaction of traders to this information will be extremely weak or will be absent at all. Apart from the German GDP, no other important publications are planned for today. It should be noted that Germany’s GDP itself does not fall into the category of important news since although it has an impact on the European indicator, it is still only one country out of 27 that are members of the European Union. Thus, in almost any case, the fundamental background will not have much impact on the course of trading. This does not necessarily mean that the pair will stay in one place all day. For example, during the three-week period when the euro was cheaper almost every day, there were also days with zero macroeconomic background. Nevertheless, traders continued to sell off the euro. If the majority of traders decide that it is time to close the “dollar” positions, the euro will be able to continue the corrective growth. Monday is proof. The macroeconomic background was zero, however, the euro showed an increase of 60 points from the lows of the day.
Meanwhile, the EU faces a new problem. A financial problem – namely, the shortfall of 75 billion euros that the UK previously contributed. According to his colleagues, the President of the European Council, Charles Michel, “wants too much.” Roughly speaking, there is not enough money for its version of the euro budget, so European colleagues refuse to support this document. The issue of long-term EU budgeting was supposed to be resolved within the framework of the EU summit, however, according to various sources, on the first day of negotiations, the process had to actually stop in order to start searching for sources of funding. In the future, several funding options will be put forward for consideration, however, the adoption of the budget for 2021-2027 will take place later. The problem is simple. After the UK leaves the European Union, some countries that are called the “modest four” (Austria, Netherlands, Denmark, and Sweden) are calling for budget cuts and cuts to a number of European programs to compensate for the deficit. The European Commission has already announced a reduction in funding for research and innovation projects, the space program and the armed forces mobility program.
From a technical point of view, the euro/dollar pair resumed its upward movement. However, both channels of linear regression are directed downward, so the maximum that the euro can expect now is a correction.
The average volatility of the euro/dollar currency pair is 54 points per day. The volatility indicator has started to grow. However, given the weak macroeconomic background this week, it may soon begin to decrease again to its usual 40 points per day. Thus, on Tuesday, we expect movement between the borders of the volatility corridor of 1.0905-1.0795. A downward reversal of the Heiken Ashi indicator will indicate a correction turn against the correction.
Nearest support levels:
S1 – 1.0803
S2 – 1.0742
S3 – 1.0681
Nearest resistance levels:
R1 – 1.0864
R2 – 1.0925
R3 – 1.0986
The euro/dollar pair started a corrective movement, formally – an upward trend. Thus, purchases of the European currency with the targets of 1.0864 and 1.0905 are relevant now. You can return to sell positions after the price is fixed below the moving average line with the targets of 1.0803 and 1.0742.
In addition to the technical picture, you should also take into account the fundamental data and the time of their release.
Explanation of the illustrations:
The highest linear regression channel is the blue unidirectional lines.
The lowest linear regression channel is the purple unidirectional lines.
CCI – blue line in the indicator window.
Moving average (20; smoothed) – blue line on the price chart.
Murray levels – multi-colored horizontal stripes.
Heiken Ashi is an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
The material has been provided by InstaForex Company – www.instaforex.com