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Euro-American roller coaster

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Monday, 03 June - 12:35

Euro-American roller coaster | Image 1

The EURUSD confrontation always was quite impressive for a trader because various things make EURUSD a traditional instrument as for speculations as for hedging. For example, the relative effectiveness of the market, high liquidity, extensive information field, and overall stability. Since the beginning of the year, we can see a clear downward trend, which apparently will not end. Today we will check if this is indeed the truth and what should we expect from EURUSD soon.

Basic arguments

A downward movement is a sustained trend for EURUSD. This is due to the difference in the investment attractiveness of the US in comparison to the Eurozone. Such an advantage reflects the policy of raising the interest rate by the US as well as the difference of 2,5%, which emphasizes that the fair price for EURUSD now is 1,133842 while the actual is 1,11815.

In such a manner, we can say that the current rate is tremendously lowered artificially and EURUSD is underestimated. We can expect a correction soon, back to the fair price. Also, we can say about the expectations of investors who believe that the closest forward rate of EURUSD for the next two weeks is positive and close to a fair balance.

Technical arguments

Despite a clear downward trend of the EURUSD price since the beginning of the year, the current situation looks like it is about to turn back because the volumes decrease and price movements become weaker reducing amplification of price fluctuations.

Euro-American roller coaster | Image 2

Picture 1. A price chart and the volume of trades for EURUSD for the period of 01.01.2019 - 28.05.2019.

In picture 1 we can see that the trend of EURUSD looks like cyclical fluctuations that repeat amplitude again and again. Moreover, we can see that the last cyclical fluctuations had a smaller amplitude and gradually started to grow. Also, in picture 1 we can see that the signs of future growth accompany almost each growth cycle.

Euro-American roller coaster | Image 3

Picture 2. A price chart of EURUSD for the period of 23.04.2019 - 28.05.2019.

In picture 2 we can see that the price gradually moves to the growth cycle. However, a narrow amplitude and reduced volatility indicate a soon period of sudden movements, which will most probably grow up to a fair price.

Analysis of big traders' positions

From the point of view of big traders, hedgers keep the current positions at maximum levels, which indicates an expectation of returning to a fair price.

Euro-American roller coaster | Image 4

Picture 3. A price chart and the index of big traders' positions of EURUSD for 23.04.2019 - 28.05.2019.

As we can see in picture 3, the current positions of big traders remain at maximums. At the same time, hedgers' positions began to reduce, which indicates fixation of a lower price bound and expectations of growth.

Forecast for the coming week

To underline all the arguments mentioned above, we can conclude that the expectations of growth are quite clear. As of today, it is the most adequate forecast for EURUSD if the coming week does not bring any structural shifts towards a reevaluation of the Euro through softening of the monetary policy or weak unemployment data and unexpected changes in the level of consumer prices.

With regard to the current outlook, we can say that we expect the growth of EURUSD for the next week.

Indicators:

The following indicators will be handy for higher profits and more comfortable market entry:

- Stochastic

- RSI

Trading positions: on this week it is better to keep 2 trades "up" and 1 "down".

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