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Overview of the EUR / USD pair. June 11th. Inflation in the US is growing, the ECB leaves the parameters of monetary policy unchanged.


4-hour timeframe Technical data: Major linear regression channel: direction – up. The lowest linear regression channel: direction – up. Moving average (20; smoothed) – sideways. СCI: 17.2729 The EUR / USD currency pair on Thursday, June 10, again traded very calmly for most of the day. Until about 12-30 GMT, when Christine Lagarde’s talk kicked off and American inflation was published. However, we will talk about this below. In the meantime, I would like to say that the euro / dollar pair, despite the ultra important events of the past day, still remains within a limited price range. Even yesterday’s events could not bring it out of the approximate channel 1.2110 – 1.2260. Of course, this channel cannot be called clear and lateral. The pair still had a minimal downward bias in recent weeks. However, all this movement does not even fall under the definition of “correction”. Quotes moved away from their local highs by 160 points and that’s all. Thus, globally, the technical picture has not changed at all. This is exactly what we have been talking about lately. All macroeconomic events can affect the movement of the pair, but only local. Global factors, global market sentiment and trend direction do not change from them. Once again, we draw the attention of traders to the fact that American statistics are much better than European ones. This can be explained very simply: the American economy is recovering from the crisis at a much higher rate than the European one. Not surprisingly, all of its macroeconomic indicators are higher than European ones. Nevertheless, if we talk about the rates of national currencies, then it is the European currency that remains “on horseback”, which has been rising in price for 15 months. Why is it so? If we do not even take into account the completion of the global downtrend in 2017, then the global fundamental factors remain on the side of the euro currency. The Fed and the US Treasury continue to saturate the economy with hundreds of billions of dollars and have not given any signals that this process will be completed anytime soon. Thus, the money supply in the United States continues to swell and this factor is multiplied by high inflation, which, as it became known yesterday, has already accelerated to 5%. All this leads in the long term to a fall in the dollar, and in the short term – to the inability of the American currency to rise in price at least a little. After the publication of yesterday’s report on inflation in the US, the American currency began to fall in price again. And this is an absolutely logical phenomenon, since inflation in general, no matter what goals the Fed sets for itself, is a negative moment for the economy. And even more so for the national currency. Therefore, when traders learned that the consumer price index rose not to 4.7%, as predicted, but to 5.0%, naturally, they began to sell off the American currency. True, an hour later the movement changed to a downward one, but this does not change the essence of the matter. Apart from inflation, there was another important event on Thursday that deserves consideration. True, there really isn’t much to consider. The next meeting of the ECB passed without surprises, as most experts expected. The key rate of the ECB remained at the level of 0%, the deposit rate – at the level of -0.5%. The accompanying monetary policy statement said key rates would remain at or below current levels until inflation is stable at 2% over the medium term. In addition, the regulator announced the preservation of the program for buying up Eurobonds under the PEPP program for a total of 1.85 trillion euros. The final communiqué stated that the ECB will continue to purchase bonds every month at least until the end of March 2022 or until a decision is made that the “coronavirus crisis” is over. In addition, the ECB also clarified that in the next quarter, purchases of bonds will be made at a higher pace than in recent months, explaining this by the need to implement a flexible approach in this matter. The ECB also noted that it does not want to allow tightening of financing conditions, which will put pressure on inflation. The reinvestment of the income from the purchased securities will be carried out until the end of 2023, at least. In addition, the ECB announced its intention to maintain the current pace of asset repurchases under the APP (regular QE) program in the amount of 20 billion euros per month. Reinvestment in these securities will continue for a long time even after the start of the rate hike cycle. Also in the communique it was emphasized that the ECB reserves the right to change the parameters of monetary policy in order to achieve the target inflation rate. Thus, the only thing that the ECB changed during the last meeting was the increased rate of asset buybacks from the open market. This factor can be considered “bearish”, although in fact, in principle, it does not really matter at what pace the ECB will buy up. There is a total volume of the PEPP program and so far there is no talk of changing or increasing it. Also, the ECB has not in any way hinted that the stimulus programs may end soon, which means it sends a signal to the markets that the EU economy is still too weak and still needs help from the central bank. In principle, we expected exactly such results. No one expected from the ECB even a hint of a tightening of monetary policy, given that in the fourth and first quarters there was a decline in GDP. Moreover, we do not expect any hints of curtailing the incentive program until the end of 2021, at least. Inflation in the European Union, as we can see, reached the target value for the first month. For the ECB to recognize the level of inflation as satisfactory, it is necessary that at least for 6-8 months inflation be at least 2%. And with this, problems may already arise, since Christine Lagarde has repeatedly stated that the current surge in inflation may be temporary and due to higher energy prices and a low base. The volatility of the euro / dollar currency pair as of June 11 is 54 points and is characterized as “average”. Thus, we expect the pair to move between the levels of 1.2122 and 1.2230 today. A reversal of the Heiken Ashi indicator back downward will signal a new round of downward movement within the flat. The nearest support levels: S1 – 1.2146 S2 – 1.2085 S3 – 1.2024 The nearest resistance levels: R1 – 1.2207 R2 – 1.2268 R3 – 1.2329 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 the target of 1.2122 if the Heiken Ashi indicator turns down. It is recommended to consider buy orders not earlier than a new reversal of the Heiken Ashi indicator upward with targets at 1.2207 and 1.2230. The pair continues to be in a kind of flat, which should be taken into account when opening any positions. We also give recommendations for trading on lower timeframes. We recommend that you familiarize yourself. Links below. Recommended reading: Review of the GBP / USD pair. June 11th. Regular negotiations between London and Brussels ended without progress. Trading signals, COT report: Forecast and trading signals for the EUR / USD pair for June 11. Forecast and trading signals for the GBP / USD pair for June 11. – Source: InstaForex

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