July 6, 2021

Overview of the EUR/USD pair. July 6. A global corporate tax of 15% will be introduced.

 Technical details: 

Higher linear regression channel: direction - sideways. 

Lower linear regression channel: direction - downward. 

Moving average (20; smoothed) - sideways.

CCI: -9.4452

The EUR/USD currency pair was trading extremely calmly on Monday, July 5. In principle, nothing is surprising in this. Yesterday, Independence Day was celebrated in the United States. Respectively, today, the markets were in a state of a semi-exit day. In addition, no important publications and events were scheduled for Monday. At least in the US. Two speeches by Christine Lagarde were supposed to take place in the European Union. However, the ECB president spoke three times last week and generally does it quite often. Thus, it is extremely difficult to expect any new and important information from her every time. In general, by all parameters, Monday should have been very boring. As well as 60% of all trading days for the euro/dollar pair in recent months. Recall that the volatility recently leaves much to be desired, which is seen in the illustration below. Thus, 3 out of 5 trading days usually occur in such very weak movements. Moreover, last Friday, quite important statistics were published in the United States, which also did not cause a really serious surge in volatility, and also did not cause a logical reaction of the market. We still believe that the most important report of that day was Nonfarm Payrolls, which exceeded the forecast values, and its value of the previous month was revised upwards. Thus, the US dollar simply had to rise in price on Friday but did not do so. At that time, we still assumed that this round of the global downward movement would be completed. Usually, when traders begin not to react to statistics as they should, this is an indirect reason to expect the end of the current trend. However, we also recall that, according to global technical factors, the euro/dollar pair still retains excellent chances of falling to the level of 1.1700 or slightly lower. Thus, the situation for the pair is now a bit ambiguous, but in any case, until the price overcomes the moving average line, it does not make sense to consider the upward movement seriously.

What can be noted now from the local fundamental background? We have already talked about reports on the US labor market many times. But there are no fundamental topics that could have a strong impact on the dollar or the euro right now. What interesting things are happening in the United States and the European Union now? In Europe – definitely nothing. If there have been hints in the United States recently that the quantitative stimulus program may begin to be curtailed in 2021, then the EU does not even think about such a thing. As Christine Lagarde has repeatedly stated in an open text recently. Thus, we do not expect any changes or even hints of these changes from the head of the ECB and the regulator itself in the coming months. Of course, there are more interesting topics in the USA. First, the issue of raising taxes for multi-corporations, as well as rich Americans, is hanging in the air. Secondly, the issue of the adoption of the budget for the 2022 fiscal year is also in the air. Third, the US Congress is now facing the problem of raising the national debt limit, without which the government will have to default in August. Of course, the last point sounds very loud and threatening, but in fact, the United States faces such a problem almost every year. During the time of Donald Trump, two shutdowns stopped the work of all state structures. Thus, it is obvious that politicians will not allow any default in the United States, even a technical one. Naturally, the debt ceiling will be raised, the only question is to what level. Therefore, this is not a problem. The same applies to the adoption of the budget for the 2022 fiscal year. Recall that Joe Biden wants to add two packages of incentives to the expenses of this budget: "infrastructure" and "social", with a total complexity of $ 4 trillion. Thus, the total expenditures on this budget will exceed $ 6 trillion. Naturally, the Republicans are against such waste, but at the same time, they can do nothing with the Democrats if all 50 senators vote "for" such spending. So far, this moment is the key question, will all Democratic senators approve of the spending proposed by Joe Biden? We believe that yes, so there is nothing to worry about here either.

Separately, we can also recall the single corporate tax of 15% proposed by US Treasury Secretary Janet Yellen for all countries of the world. About a month ago, the proposed initiative was approved by the G-7 countries. On July 1, a virtual meeting was held during which the proposal was supported by the G-20 countries, as well as 130 other countries of the world. Now the governments of each country that has given its consent must develop appropriate legislation, according to which all companies with headquarters will have to pay at least 15% of income taxes to the treasury of this state. Let's recall the whole essence of this innovation. Large countries believe that multinational corporations evade paying huge amounts of taxes, as they register their divisions and production facilities in countries with low tax rates, for which this is almost the only way to attract investment. Therefore, the proposal for a single tax of at least 15% should make it unprofitable for large corporations to "relocate" to "tax havens". Most likely, the process of re-resettlement will not begin, but in many countries that attract large companies with low taxes, the flow of investment may decrease slightly. So far, it is difficult to say what is the point of such small and underdeveloped countries to agree to Janet Yellen's proposal. However, probably, in any case, there would be a lever of pressure on these countries. And in any case, any increase in income taxes will mean that end consumers will pay more, and not that company profits will fall.

The volatility of the euro/dollar currency pair as of July 6 is 53 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1814 and 1.1920. A reversal of the Heiken Ashi indicator downwards signals a possible resumption of the downward movement.

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 to adjust. Thus, today it is recommended to open new short positions with targets of 1.1814 and 1.1780 after the Heiken Ashi indicator turns down or in the case of a price rebound from the moving average. It is recommended to open buy orders now no earlier than fixing the price above the moving average line with targets of 1.1920 and 1.1963.