As expected the day before, the main event of yesterday was the semi-annual report on monetary policy by Fed Chairman Jerome Powell, with which he addressed the US Congress. This was the first part of the speech of the head of the Federal Reserve, in which he outlined the current state and prospects of the US economy. I will focus on the main excerpts from yesterday's speech by Powell. According to the chief American banker, the economic situation in the United States has improved significantly recently, and the recovery is taking place at a faster pace than previously expected. The timely and correct actions of the Federal Reserve System (Fed) played a significant role in this. However, a full recovery is still far away, so the Federal Reserve will continue to provide economic growth in the United States with all the necessary support measures.
At the same time, Powell stressed that all these actions will take place strictly within the framework of the Fed's mandate to maintain price stability. In other words, it is too early to relax, since all the negative consequences of the COVID-19 pandemic will still have to be analyzed and evaluated. Regarding inflationary pressure, the head of the Federal Reserve noted that this year it will depend on the overall recovery of the economy, but even if inflation is too high, the US Central Bank will have the necessary tools to limit it. In general, the Fed chairman's speech can be considered quite optimistic, and the rhetoric is very close to hawkish. Powell noted an increase in household spending, as well as a significant recovery in industrial production and the housing sector. At the same time, Jerome Powell refrained from forecasting the timing of a rate hike, as the devastating extent of COVID-19 for the world's leading economy is not yet fully clear.
The main events of today's day will be data on orders for durable goods, as well as business activity indices in the manufacturing and services sectors. And at 15:00 London time, Jerome Powell will again address congressmen with a report on monetary policy. In the first half of the day, Germany and the eurozone as a whole will report on business activity in the manufacturing and services sectors. Now we turn to the analysis of the price charts of the EUR/USD currency pair.
Daily
As can be seen on the daily chart, at yesterday's trading, the main currency pair of the Forex market significantly sank, ending trading on March 23 at the level of 1.1848. At the same time, the huge black candle slightly absorbed the previous white one. This factor can be regarded as a continuation of the downward dynamics of the euro/dollar, and the bullish candle for March 22 can be considered a correction or an unsuccessful attempt by the euro bulls to seize the initiative from their opponents. At the end of the review, EUR/USD continues to decline and is currently testing the orange 200 exponential moving average for a breakdown, which passes at a significant support level of 1.1835. If today's trading ends below this mark, it can be regarded as a signal to continue the downward trend. The main question is whether the pair will be able to gain a foothold under the 200 EMA and the 1.1835 level later?
H1
The hourly chart clearly shows that the active strengthening of the US currency against the euro began long before Jerome Powell's speech in the US Congress, which indicates a bearish market sentiment for EUR/USD. At the end of the article, the pressure on the single European currency is increasing, and quite significantly. If you define trading ideas for EUR/USD, then the main one is the pair's sales. However, I consider it risky to sell at the very bottom of the market, and even on such a strong downward movement. I suggest waiting for the closing of three consecutive hourly candlesticks under the support level of 1.1835, then open short positions on a pullback to it. Given the strength with which the pair passes down this level, its breakdown is unlikely to be false. However, everything happens in the market, so I recommend looking for higher prices for sales in the case of a rise in EUR/USD in the price zone of 1.1850-1.1870. There are no signals for purchases yet, but if there are reversal patterns of candle analysis in the area of 1.1800-1.1775, you can buy, but only with small goals, while only counting on a correction.
