Long-term perspective.
The EUR/USD currency pair has made another attempt to start an upward correction during the current week. But, as a week earlier, it could not overcome the critical Kijun-sen line, so the downward movement of the pair may resume. The key event this week was the Fed meeting. However, it did not lead at all to the movement that most traders could count on. Although the key rate was raised for the first time in three years, traders at that time were quite actively selling the US currency. That is, the reaction was exactly the opposite. However, if we try to look at the picture more globally, it turns out that the European currency has declined very much even before the Fed meeting. Of course, then there were their reasons, namely geopolitics. Recall that on February 24, a military conflict began in Ukraine, which has not yet been completed. However, if the European currency were falling on absolutely every important news or topic, it would already be below price parity with the US dollar. Simply put, whatever the fundamental background, the pair should be adjusted from time to time. And this week, it happened that the "technique" turned out to be stronger than the strong "foundation". However, if we take a medium-term perspective, absolutely nothing has changed for the European currency. The ECB not only did not raise the rate but also did not give a single signal of readiness for tightening this year. The Fed, on the contrary, made it clear that it is ready to raise the rate 6 more times this year alone. In addition, the geopolitical conflict in Eastern Europe puts pressure on the euro currency, not on the dollar. In addition, the European economy is in a much weaker state than the American one. From our point of view, all these factors will continue to harm the euro/dollar pair.
COT analysis.
In the last two months, COT reports have signaled such changes in the mood of traders, which did not correspond to what was happening in the foreign exchange market. Simply put, the European currency continued to fall, while large professional traders increased purchases. We said that such divergence could arise since the demand for the US currency increased sharply, which was simply higher than for the euro. However, the latest COT report showed that the big players are also starting to change their preferences. During the last reporting week, the Non-commercial group reduced the number of buy contracts by 40 thousand. That's a lot. The general mood of non-commercial traders remains "bullish", as the number of buy contracts exceeds the number of sell contracts by 19 thousand. However, trends are important to us. And now the trend is such that even major players can start selling the European currency again. This is on top of the fact that the demand for the US dollar also remains high. Thus, the net position of the "Non-commercial" group decreased significantly last week and now almost all factors speak in favor of a further fall in the euro currency. Therefore, the European currency can now show growth from time to time only based on the technical necessity to adjust.
Analysis of fundamental events.
There have been quite a lot of interesting events in the European Union during the current week. In particular, the report on industrial production showed zero growth in January, and the consumer price index managed to grow even stronger in the second assessment for February and amounted to 5.9%. ECB President Christine Lagarde spoke twice this week and both times spoke about the need to stabilize prices, but she never said how this stabilization would be achieved. The European economy is weak, so rates cannot be raised. Inflation is rising and will continue to rise due to high prices for energy and raw materials, the geopolitical conflict in Eastern Europe, the deterioration of supply chains (many of which are tied to Ukraine for the European Union). Thus, the ECB is going to just wait for prices to settle by themselves. Lagarde said that in the medium term, inflation will return to 2%, but that in her concept of "medium-term perspective" is unknown. In general, there is nothing to fight inflation in the EU.
Trading plan for the week of March 21-25:
1) In the 24-hour timeframe, the pair began to adjust and managed to grow to the critical line. However, at any moment, the fall of the euro currency may resume, since almost all factors speak in favor of further growth of the dollar, and not vice versa. Therefore, if it is not possible to gain a foothold above the Kijun-sen line, then the fall will resume with targets of 1.0884 and 1.0661. So far, sales remain the most relevant.
2) As for purchases of the euro/dollar pair, they are not relevant now. First, there is not a single technical signal or sign that an upward trend may begin. Second, the "macroeconomics" that could theoretically support the euro is simply ignored. Third, geopolitics may continue to put pressure on traders and investors who still believe that in any unclear situation it is necessary to buy the dollar. And even if the price overcomes the critical line, it does not guarantee its further growth. Over the past 8 months, the price has failed to overcome the Senkou Span B line several times on the 24-hour TF.
Explanations to the illustrations:
Price levels of support and resistance (resistance /support), Fibonacci levels - targets levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5).
Indicator 1 on the COT charts - the net position size of each category of traders.
Indicator 2 on the COT charts - the net position size for the "Non-commercial" group.
