11.10.202205:59 Forex Analysis & Reviews: Overview of the EUR/USD pair on October 11, 2022

The EUR/USD currency pair traded quite calmly on Monday but was still in the same downward trend as a few days earlier. No one doubts that we are seeing a new round of downward movement in the same global downward trend that has been forming for almost two years. Thus, all that the euro was capable of was another 400-point correction. The pair have been falling for three days, and no macroeconomic statistics can explain this fall. Last Friday, there was such strong data (which contributed to the growth of the dollar) that it could be considered to have "influenced the mood of traders." However, just last Friday, the market showed the least volatility in recent times, and the dollar rose by some 50 points. Compared to a day earlier and two days earlier, it showed much more impressive growth. Thus, conclusion number one: the market is still under the strongest impression of geopolitics and the "foundation." Nothing has changed.

Unfortunately, neither geopolitics nor the "foundation" has the slightest inclination to improve now. The "foundation" under which we consider the monetary policies of central banks and the global actions of the central bank, such as various stimulus and tightening programs, is a double-edged sword. They cannot be unambiguously considered "bad" or "good." Then geopolitics leads to global changes and is "bad" for everyone. We are no longer just witnessing a military conflict between Ukraine and Russia. We are already witnessing a kind of world war because each side has its own allies, weapons suppliers, equipment, and financial assistance. International corporations and cartels also work "in their interests." Everyone adapts to new circumstances and acts within the framework of the "peace to the world" paradigm, but not everyone. We do not see any signs yet that the geopolitical conflict in Ukraine will begin to de-escalate.

OPEC has reduced production by 2 million barrels per day.

A little earlier, we said that each party acts in its own interests within the framework of an international conflict. The other day, it became known that the OPEC countries decided to reduce oil production by 2 million barrels per day. It does not even matter how much production will be reduced. The reduction must occur against an oil shortage in certain locations and a general price increase for all types of energy resources. From the high school economics course: if supply falls and demand does not, then prices rise. It turns out that this OPEC decision will provoke a new rise in oil prices and all derivative products against the background of global inflation. Why is such a decision taken if it is not beneficial to the world?

Here the answer will be given by politics. The fact is that every country in the world has its own sphere of interest. With the help of international financing of certain parties or individual politicians, it is possible to influence the political composition of the governments of certain states. Oil volumes will decrease, and fuel, heating, and energy prices will rise, which will cause displeasure in many countries among their residents. And the residents are the electorate. Ordinary citizens don't think big. They are primarily interested in their work, salary, expenses, and the cost of utilities, not the geopolitical conflict in Ukraine, the eternal struggle of the West with the East, and the problem of the colonization of Mars. Thus, if their standard of living begins to fall, the next elections may not be won by those politicians who are now in power. We have already seen the far-right parties' victory in Italy's elections. In France, Marine Le Pen, who had recently advocated the collapse of the European Union, had a real chance of winning. In the States, parliamentary elections are coming soon, and Democrats who actively oppose Russia and support Ukraine may be defeated. The Republicans, having come to power, can change the vector of their policy towards Ukraine and Russia. Maybe it's good, maybe it's bad, and maybe nothing will change at all, but the point is that OPEC countries' decline in oil production may be aimed at changing the government in a particular country.

The average volatility of the euro/dollar currency pair over the last five trading days as of October 11 is 131 points and is characterized as "very high." Thus, on Tuesday, we expect the pair to move between the levels of 0.9573 and 0.9834. A reversal of the Heiken Ashi indicator upwards will signal a round of upward correction.

Nearest support levels:

S1 – 0.9644

S2 – 0.9521

Nearest resistance levels:

R1 – 0.9766

R2 – 0.9888

R3 – 1.0010

Trading Recommendations:

The EUR/USD pair has consolidated below the moving average line. Thus, now it is necessary to stay in short positions with targets of 0.9644 and 0.9573 until the Heiken Ashi indicator turns up. Purchases will become relevant again no earlier than fixing the price above the moving average with goals of 0.9834 and 0.9888.

Explanations of the illustrations:

Linear regression channels help determine the current trend. The trend is strong if both are directed in the same direction.

The moving average line (settings 20.0, smoothed) identifies the short-term trend and the direction in which you should trade now.

Murray levels are target levels for movements and corrections.

Based on current volatility indicators, volatility levels (red lines) are the likely price channel in which the pair will spend the next day.

The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.