Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - upward.
CCI: 197.4055
The EUR/USD currency pair calmed down on Tuesday after a fairly active Monday. Nevertheless, it maintained an upward trend, as the price continues to be located above the moving average line. Thus, the upward movement may continue in the near future, especially since now there is a favorable environment for a further fall in the US currency. Recall that from our point of view, in the first three months of 2021, a banal technical correction was observed for the euro/dollar pair. Thus, if it was really a correction and it has already been completed (almost 38.2% by Fibonacci), then a new round of upward movement will begin, which can take the pair well above the previous 2.5-year high just above the level of $ 1.23. We believe that this is the option for the US dollar in 2021. Of course, everything changes very quickly in the world, so the current hypothesis may change to another one tomorrow or in a month. But so far, there are no grounds for recognizing its insolvency. We still believe that the US currency will become cheaper due to the banal increase in the amount of US currency in circulation and the economy, as well as in the foreign exchange market. Therefore, traders and major players will not have to do anything to make the dollar cheaper. It will simply become more, which will provoke a fall in its course. Remember the COT reports on the euro for the last 6-8 months. Since September last year, the mood of the "Non-commercial" category of traders has become more "bearish", however, the euro currency continued to grow. Why? Because the supply of the dollar has been steadily increased by trillions of dollars coming into the economy from Congress and trillions of dollars from the Fed. In 2021, this process continues, which has already been discussed several times by Joe Biden, who already in the first half of the year wants to adopt 2 stimulus packages at once, totaling about $ 4.5 trillion. It is supported by Congress (where the majority of votes is held by the Democrats). Jerome Powell has also hinted at a possible curtailment of the quantitative stimulus program. Therefore, the money supply in the US will continue to grow.
Meanwhile, some world-famous publications (although it was the US economy that collapsed a year ago by 31.4% q/q, in contrast to the European economy, which lost only 12%) believe that America has already gone far ahead of Europe. They believe that the US is recovering much faster than Europe and the gap between their economies will only increase in the near future. At least, The Financial Times thinks so. According to the publication, the COVID pandemic caused more damage to the European Union. Analysts of the publication considered that the difference between the maximum volume of production and its current level in Europe is much greater than the same indicator in the United States. Thus, the EU economy creates fewer jobs and provides lower demand. Experts also draw attention to the fact that in the United States, the economy is stimulated by trillions of dollars, which contributes to faster inflation and a faster recovery. But in the European Union, public spending on overcoming the pandemic is much weaker, and the pace of vaccination and the third "wave" of the pandemic cast great doubt on the resumption of economic recovery in the near future (recall that the fourth quarter-2020 and the first-2021 EU GDP may be negative). Experts predict that the United States can catch up with its pre-pandemic path of economic growth as early as next year, however, Europe may need several years to achieve a similar achievement. Thus, the US economy in a year can feel exactly as if the pandemic did not happen at all, and the EU economy does not. This will mean that the gap between GDP volumes will increase in favor of the US starting in 2019.
The Financial Times journalists pay special attention to the comparison of vaccination rates in the US and the EU. If US President Joe Biden believes that by May 1, the entire adult population of the country should be vaccinated, then the European Union dreams of 70% of vaccinated adults only by September. In the United States, quarantine restrictions are being removed and relaxed everywhere, while in the European Union, on the contrary, new "lockdowns" are being introduced and quarantine measures are being tightened. Representatives of the ECB and the Federal Reserve also recognize the widening gap between the economies. Vitor Constancio, Vice-president of the European Central Bank, said that the European Union can get only 50% of the growth of the US economy this year. But the Fed, on the contrary, can and will raise its economic forecasts for the coming years, as the program of stimulating the economy for $ 1.9 trillion has already begun to be implemented. Economists also predict that the US economy will grow by 6.5% in 2021, while the EU economy will grow by just 3.9%.
Also, economists say that in the United States, households have accumulated about $ 1.5 trillion in household accounts, which corresponds to 14% of nominal private consumption. In the European Union, this amount is only from 3% to 7%. That is, the US economy may receive a strong push from the country's population, which will begin to spend the money unspent during the pandemic. However, in the European Union, the same push will be much weaker. However, for the US currency, all this advantage may not matter much. Of course, market participants will be much more willing to invest in the dollar and the American economy. But for the US dollar to grow at the same time, its supply in the foreign exchange market and the economy should increase at a slower pace, which will be very difficult to achieve, given the number of injections into the US economy in 2020 and 2021.
The volatility of the euro/dollar currency pair as of April 7 is 62 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1798 and 1.1922. A reversal of the Heiken Ashi indicator downwards signals a possible round of a downward correction.
Nearest support levels: S1 – 1.1841 S2 – 1.1780 S3 – 1.1719
Nearest resistance levels: R1 – 1.1902 R2 – 1.1963 R3 – 1.2024
Trading recommendations:
The EUR/USD pair continues a rather strong upward movement. Thus, today it is recommended to stay in long positions with targets of 1.1902 and 1.1922 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders if the pair is fixed back below the moving average line with a target of 1.1719.
