Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -91.0220
On Monday, June 14, the EUR/USD currency pair traded very calmly and very normally, as for the first trading day of the week. However, we recall that the main movements of the pair showed last Friday. Nothing was interesting either in the European Union or in the United States on Friday. But on Thursday, when the results of the regulator's meeting were summed up in the EU, and a very strong inflation report was released in the US, the pair was trading very actively, but at the same time weakly volatile. Thus, macroeconomic statistics continue to have a very indirect impact on the movement of the pair, even in the short term. We have already said that the statistics now can only be expected to have a local impact on the euro/dollar pair. There is no reason to expect that the statistics will affect the global trend, which remains upward. Even the decline in the pair's quotes, which began on May 25 (it has been going on for three weeks), can not even really be called a correction, since its size is only 170 points. 170 points in three weeks. Recall that the last round of the upward trend is 560 points. In general, the European currency is traded in its way. If the correction is necessary, it is long and slow. If there is a trend, then it is necessarily slow and not strong. And the global fundamentals remain the same. The Fed continues to pour $ 120 billion into the economy every month. The US authorities continue to consider the budget for the 2022 fiscal year at $ 6 trillion, which is three times the size of the previous budget. It is not known how much more money the Fed will print and how much will be allocated by the US Treasury, which will simply borrow this money, and then the Fed will buy back these debts again. One thing is clear: the process of printing money will not stop in the near future, which means that we continue to expect a new round of depreciation of the US currency. Both by increasing the money supply and by increasing inflation. The money supply is growing faster in the United States than in the European Union, where the ECB also saturates the economy with liquidity, but for smaller amounts. And inflation in the European Union is 2.5 times lower than in America. In addition, the EU authorities do not spend fabulous sums to support their economy. Even the 750 billion euro economic recovery fund (which is due to start being distributed this summer) is money that will be allocated by the central banks of each EU member state, rather than printed by the ECB. In general, we believe that the skewed balance between the US and EU money supply will continue and will continue to increase.
Meanwhile, the ECB said that in the event of strong acceleration in inflation, they will be ready to review their monetary policy strategy. It was announced by ECB member Robert Holzmann. According to him, concerns about inflation are growing. However, it is too early to talk about winding down PEPP. "PEPP will end in March next year if there are no new waves of the epidemic," said Holzmann. "However, if the CPI exceeds 3%, the ECB may reconsider its monetary strategy," the politician added. Thus, the ECB also has a backup option up its sleeve, which may come in handy if inflation continues to accelerate. However, it's not just about inflation alone. Recall that inflation for the Fed and the ECB is more a guide than a goal. If inflation accelerates strongly, and the economy does not have time to recover to pre-pandemic levels, then it will be necessary to maintain the program of support for the economy and to fight inflation in other ways or not to fight at all. In any case, inflation in the EU does not cause any concerns now. At the end of May, it was only 2% y/y, which is the target level of the ECB. In addition, the May-month base was too low. Thus, it is still very difficult to talk about the actual acceleration of the CPI at least in the medium term. Inflation will need to be looked at in late summer or early autumn. If it does accelerate to 3%, then the ECB may announce the end of PEPP. However, it is unlikely before March 2022. Last week, when the results of the ECB meeting were summed up, Christine Lagarde repeated this phrase. "Before March 2022, no one is even thinking of ending the incentives now." Thus, we are not waiting for any changes yet. The same applies to the Fed, which will summarize the results of its meeting this week.
For the euro/dollar pair, this means that the global technical and fundamental picture is unlikely to change in the near future. If the ECB had already started talking about curtailing its stimulus programs, and the Fed had not, then the euro would simply accelerate its growth against the dollar. If the opposite were true, the US currency would receive minimal market support. In the meantime, only the markets themselves are discussing the possible timing and possible actions of the American and European regulators. The regulators themselves only limit themselves to rhetoric like "if the economy continues to grow and inflation accelerates, then we can start considering options for tightening monetary policy." At the same time, all representatives of the ECB and the Fed say that this is not a near-term prospect. Thus, this week, the upward movement of the euro/dollar pair may resume, since the downward correction is very weak and passes in waves that are approximately equal in size. It is logical to assume that a strong wave down will be followed by a strong wave up.
The volatility of the euro/dollar currency pair as of June 15 is 54 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.2068 and 1.2176. The upward reversal of the Heiken Ashi indicator signals a new round of upward movement within the weakest downward trend.
Nearest support levels: S1 – 1.2115 S2 – 1.2085 S3 – 1.2054
Nearest resistance levels: R1 – 1.2146 R2 – 1.2177 R3 – 1.2207
Trading recommendations:
The EUR/USD pair has started a new round of upward movement. Thus, today it is recommended to open new short positions with a target of 1.2122 if the Heiken Ashi indicator turns down. It is recommended to keep open buy orders until the Heiken Ashi indicator turns down with the targets of 1.2177 and 1.2207. The pair continues to be in a flat, which should be taken into account when opening any positions. We also give recommendations for trading on lower timeframes.
