As we said in previous articles, the euro/dollar pair is currently trying to resume the upward trend that began in March last year and was interrupted by a three-month correction in early 2021. From our point of view, despite the highest rate of recovery of the US economy, the US dollar will resume its decline, as the US money supply and the national debt of the country are inflated just before our eyes. Thus, on the one hand, we have high growth rates, and on the other – trillions of dollars are poured into the economy to maintain it. We have already said that if it were so easy and simple to stimulate the economy (without negative consequences), then all the countries of the world would constantly print money in unlimited quantities. The fact of the matter is that you can print money and pour it into the economy, however, how can you then withdraw it from there when inflation rises? By tightening monetary policy? However, the Fed is not going to raise the rate and reduce the volume of the quantitative stimulus program in the next couple of years. In general, all these trillions of dollars poured into the economy raises a very large number of questions and concerns about the economic future of the United States. For the euro/dollar currency pair, this factor can play a key role.
Of the really important topics in the world that could theoretically have an impact on the euro/dollar pair, there is not much to highlight right now. There is a lot of news and topics, however, it is hardly possible to conclude that a possible tax increase in the United States in the future is now causing the dollar to fall. Or the low vaccination rates in the EU caused the euro to fall in the first three months. There are a lot of factors, they act at the same time, so it is impossible to say for sure why most traders sold euros for three months, and now they are buying it for dollars for a week. And, of course, the reason for this is not the growth in US government bond yields. The fundamental background may have nothing to do with it at all. As well as the macroeconomic one. With "macroeconomics" everything is clear. Think back to the Nonfarm Payrolls report a week ago and everything will become clear to you. It wasn't that there was no reaction, as traders didn't seem to have entered the market at all that day. On the following Monday, as many expected, there was also no testing of statistics. If you look at the 24-hour timeframe (especially on a small scale, so that the entire upward trend is visible), it becomes obvious that the downward movement in the last three months can be just a banal technical correction. Yes, the movement that lasted for 3 months (640 points from high to low) may simply be a technical correction, which was provoked by the closing of longs by traders, as well as a factor of temporary respite in cash injections into the US economy. Thus, now traders can resume selling the US currency, according to the general trend. And maybe even the actions of market participants will not be needed, since the US dollar may become cheaper simply because of the imbalance between the US and EU money supply due to the new trillions of dollars that will flow into the economy. Recall that recent research by Bloomberg showed that "under the pillows" of Americans is hidden about 1.5 trillion dollars. In European countries, this amount is much lower. And this money will also flow into the economy sooner or later, so it should also be taken into account.
As for the macroeconomic statistics for next week. With a probability of 90%, most of the reports again will be ignored. Therefore, these data will only allow us to understand the overall economic situation. On Monday, the European Union will publish a retail sales indicator, which, according to forecasts, can add 1.2%-1.5% in monthly terms in February. However, we recall that in January this indicator decreased by 5.9% m/m. On Wednesday, the European Union will publish a report on industrial production for February, which may fall by 0.9%-3.2% compared to January. Also negative. Christine Lagarde and Luis de Guindos will also perform on this day. And on Friday, the final estimate of inflation in the European Union for March will be released. Recall that according to preliminary data, the main indicator of inflation increased to 1.3% y/y, and the base (excluding changes in food and fuel prices) - decreased from 1.1% y/y to 0.9% y/y. Since core inflation is not exactly more important, but it excludes the impact of volatile categories of goods, we can say that inflation in the EU is declining, in contrast to the expectations of the ECB and the European Commission. Recall that in recent years, the price of oil has increased significantly, so the growth of the main inflation to 1.3% can be exclusive "oil" in nature.
Trading recommendations for the EUR/USD pair:
The technical picture of the EUR / USD pair on the 4-hour chart shows that an upward trend has been formed, however, this week there were almost no downward corrections. Moreover, from a fundamental point of view, it is quite difficult to explain the fall of the dollar. But we have already said above that, perhaps, the "foundation" did not have any influence at all, except for "global factors". Thus, next week it is recommended to trade for an increase while the price is located above the critical Kijun-sen line. The consolidation of quotes below this line can provoke a strong round of downward correction to the 18th level.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
