4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - upward.
CCI: 121.9175
The EUR/USD currency pair continues to stay within the upward trend. In the last two trading days in the United States, there were quite important and significant events, and all of them, by and large, were ignored by market participants. In general, the US dollar continues to fall in price and at the moment, buyers do not even want to fix part of their profitable long positions in order to adjust the euro/dollar pair slightly. Thus, we can't do anything else but declare that the absolute upward trend is still there. The Heiken Ashi indicator has turned down a couple of times in recent days, but the US dollar has not found any fundamental support for itself. Therefore, it could not fall even to the moving average line, which is a reference point for any correction.
We decided not to force events and wait for the reaction of both Europeans and Americans to the results of the Fed meeting. Recall that the Fed announced the results of the meeting late yesterday, when the US trading session was already over, and the European one was already closed. Thus, in fact, neither the Europeans nor the Americans had the opportunity to fully work out all the decisions of the Fed, as well as the speech of Jerome Powell. However, as it turned out at the same time, traders did not have much to react to. The regulator left all monetary policy parameters unchanged. Thus, the most interesting event on Wednesday was automatically Jerome Powell's speech. What did the Fed chief say?
There were many theses. We will not list all of them, we will focus only on the really important ones. And the most significant thesis is Powell's statement that until the "coronavirus" is defeated or at least curbed, there will not be a full economic recovery in the United States. In fact, this is what we have been talking about in recent months. Even if Donald Trump or the entire Congress decides not to introduce a new "lockdown", and state governors refuse to tighten quarantine measures, it still will not help the economy "restart". There will certainly be some recovery, but not complete and slow. In fact, this is exactly what Powell said in the next remark: "The recovery of the American economy will be long and difficult." Even if the economy is fully "open", as Trump wants it to be, this does not mean that Americans will live the same pre-crisis life. Given current disease rates, how many people in the United States want to risk their health and lives, as well as the health and lives of their loved ones? After all, it is already scientifically proven that there are risk groups that include people with various diseases, people of age, as well as people with excess weight. It is no secret that the problem with the nation's obesity is much more pronounced in the United States than, for example, in Europe. Therefore, all these factors will definitely make the majority of Americans not take extra risks. Yes, people will not give up going to the store, however, they will certainly give up optional trips, vacations, leisure in public places, and so on. And all this, in other words, is economics. All this is a drop in demand for a lot of goods and services provided in the United States. All these are layoffs and bankruptcies. All this is a slowdown or decline in the economy. This is why, in principle, it does not matter whether the country has a strict quarantine or not. Now, when everyone already knows what exactly "coronavirus" is and what the risks are, each person makes a decision for himself whether he wants to take risks or not. And there are more and more people who take the side of the "don't risk" opinion.
In addition, Jerome Powell noted the problem of deflationary pressure on the economy. Simply put, Powell is worried about slowing inflation. "At the moment, core inflation has fallen to 1%, and overall inflation is even lower. Some food groups rose in price during the pandemic, which increased the burden on people who lost income due to unemployment. However, the decline in sectors such as tourism and hospitality has led to a slowdown in consumer price growth," said Jerome Powell. "I think that for a long time we will struggle with deflationary pressure," the head of the Federal Reserve summed up the topic of inflation.
The Fed chairman also noted that much of the confrontation with the crisis will depend on the actions of the government, clearly hinting that the Congress will quickly make a decision with a new package of stimulus measures for the economy. Recall that while Republicans and Democrats can not come to a common opinion on the scope of the new package of measures to support the economy. Republicans are proposing $ 1 trillion, as well as cutting "coronavirus surcharges" to unemployment benefits by three times. Democrats believe that it is necessary to pour another $ 3 trillion into the economy and not cut payments to the unemployed. Powell promised to use the full range of monetary instruments available to support the economy.
In addition to all the above, the head of the Federal Reserve also admits that the situation may deteriorate in the near future. Everything will again depend on the "coronavirus" and the pace of its spread across the United States. According to Powell, many of those who lost their jobs in the most affected sectors of the economy will not be able to regain it. About 14 million people are currently unemployed. "The labor market still has a long way to go before recovering. We had a good job market before the epidemic. It was not perfect, there were always problems in the economy," said Powell, adding that about a third of those who lost their jobs in March and April were able to find a new one. However, the unemployment rate in the US still remains extremely high (11.1%), which is much higher than before the pandemic and during the 2008 mortgage crisis.
What follows from all this? From all this, it follows that the head of the Fed can not please the markets, can not give an optimistic forecast, can not inspire hope. And the blame for this situation is not the Fed and its head, who was mercilessly criticized and continues to be criticized by Donald Trump. The blame is just Donald Trump and his administration, who did not want to strengthen the quarantine, so now the economy can begin to slow down again, and its prospects are absolutely not defined, according to Powell. Recall that Powell is only a financier and manages only the economy, and even then not personally. There is also the Treasury Department, there is Congress, there is Trump, which also affect the economy. But Trump can make almost single-handedly decisions. At least, if they are wise, Congress can't help but support them. However, wise and far-sighted decisions of the President of the United States in recent years are obvious problems...
The volatility of the euro/dollar currency pair as of July 31 is 91 points and is still characterized as "average". Thus, we expect the pair to move today between the levels of 1.1714 and 1.1895. The reversal of the Heiken Ashi indicator downwards signals a new round of downward correction within the ascending trend.
Nearest support levels:
S1 – 1.1780
S2 – 1.1719
S3 – 1.1658
Nearest resistance levels:
R1 – 1.1841
Trading recommendations:
The EUR/USD pair resumed its upward movement. Thus, today it is recommended to stay in the longs with the goals of 1.1841 and 1.1895 until the new reversal of the Heiken Ashi indicator downward. It is recommended to open sell orders no earlier than when the pair is fixed below the moving average line with the first target of 1.1597.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
InstaSpot analytical reviews will make you fully aware of market trends! Being an InstaSpot client, you are provided with a large number of free services for efficient trading.
