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4-hour timeframe
Technical data:
The upper channel of linear regression: direction - up.
The lower channel of linear regression: direction - up.
The moving average (20; smoothed) - up.
CCI: 50.5122
On Monday, December 16, the EUR/USD currency pair continues to recover from the strong growth at the end of the previous week, which was based solely on the results of the elections in the UK Parliament. However, this, of course, the key event for the UK is already behind us, and traders need to remember exactly how to trade the euro/dollar and pound/dollar pairs when the fateful elections do not loom on the horizon. Thus, the key question for the current week is whether the bulls will be able to find at least some grounds to continue strengthening the European currency? We have been saying for a long time that the overall fundamental background is still not in favor of the euro. Thus, the strengthening of the US dollar is now much more logical. However, all market participants are well aware that one currency cannot continuously grow. Thus, any pair has such periods when one currency should grow fundamentally, and another one strengthens in fact. Due to correction, due to profit-taking by traders. And then, can we say now that the euro has strengthened strongly? From the two-year lows reached on October 1, the pair managed to move away by 250 points. A little. Thus, we still expect the resumption of the downward trend, however, we also insist that we first need to receive technical signals about the trend change and only then sell the currency pair.
The week this time will start quite interesting. Usually, Monday is a boring day when there is not a single significant macroeconomic report in the news calendar. Today, the reports will be in the European Union and the United States and they will have a sufficiently high value for the prospects of the euro currency. Today, preliminary values of business activity indices in services and manufacturing for December in Germany, in the European Union, as well as in the States will be published. Why are the preliminary values of business activity so important? Because last month, there were improvements in the business activity of the manufacturing sectors of Germany and the EU. In Germany, the figure rose from 42.1 to 44.1, and in the EU - from 45.9 to 46.9. Of course, these figures are not enough to look to the future with optimism. They are not even enough to state the end of the decline in the industrial sector. However, if business activity in the industry will recover, then there will be hopes for the resuscitation of this industry. According to experts, business activity in Germany will grow to 44.5, and in the European Union - to 47.1. If these values are exceeded, the euro currency may even receive some support from market participants. As for the services sector, there is stability on the verge of 50.0. That is, growth in the industry remains, but it is minimal. Experts do not expect a deterioration in the situation in the services sectors of Germany and the EU at the end of December 2019.
In the States, the situation is more boring. First, today, the data on business activity indexes ISM, which are considered more significant than Markit, will not be published. Second, all three PMI's from Markit are forecast with minimal changes from the previous month. Thirdly, all three indices are consistently located above the critical level of 50.0, so we do not expect any changes in these indicators. Based on all of the above, we believe that Monday can pass in fairly lively trading. If the Heiken Ashi indicator turns upward, it will mean a new approach of the euro/dollar pair to the round of the upward movement. We should not forget that despite our concerns about the fundamental baselessness of the euro's growth, the technical upward trend remains. This is indicated by both channels of linear regression directed upwards. Only the departure of the pair quotes below the moving average line will suggest the end of the upward trend.
The average volatility of the euro/dollar currency pair is gradually growing and is now 56 points per day, which is the average value for the pair. The average volatility over the last 30 days rose to 44 points. Thus, the channel in which the pair can move today is limited to the levels of 1.1071 and 1.1183. However, it should be borne in mind that around the level of 1.1183, the upward trend could end, since on October 21, October 31 and November 4, traders were not able to overcome the area near this level.
Nearest support levels:
S1 - 1.1108
S2 - 1.1078
S3 - 1.1047
Nearest resistance levels:
R1 - 1.1139
R2 - 1.1169
R3 - 1.1200
Trading recommendations:
The euro/dollar pair is in a downward correction. Thus, euro currency purchases are currently relevant with targets of 1.1169 and 1.1183, but after the reversal of the indicator Haiken Ashi up. The general fundamental background is not on the side of the euro, but until the pair's quotes consolidate below the moving average line, it is not recommended to buy the US currency.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of the illustrations:
The upper channel of linear regression - the blue line of the unidirectional movement.
The lower channel of linear regression - the purple line of the unidirectional movement.
CCI - the blue line in the indicator window.
The moving average (20; smoothed) - the blue line on the price chart.
Support and resistance - the red horizontal lines.
Heiken Ashi - an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
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