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18.02.2021 11:46 PM
EUR/USD. Bears failed to break the 1.2000 support level

As expected, the euro-dollar pair failed to overcome the support level of 1.2000 – as soon as the price approached the base of the 20th figure, traders began to take profits en masse, opening longs along the way. And this is not surprising, because the EUR/USD pair last traded under the 1.2000 mark in November last year, and since then it has only once overcome this level of support – and only for a few hours. Given this disposition, the bears did not keep the short position, satisfied with the profit received. It is noteworthy that from a technical point of view, the support level is located slightly lower – at 1.1980 (where the lower line of the Bollinger Bands indicator on the daily chart coincides with the lower border of the Kumo cloud). But the 1.20 level has a psychologically important, symbolic meaning – it is a kind of watershed, after passing which we can talk about a trend reversal.

And, judging by the current dynamics of the pair, it is still too early to talk about a reversal of the growth trend. The US currency is quite sensitive to the current macroeconomic statistics. If yesterday's releases were in favor of the greenback, today the situation is the opposite. In particular, the growth rate of initial applications for unemployment benefits jumped to 860,000 (with a forecast of growth to 775,000). This is the worst result since the beginning of January, when the indicator was released at the level of 915-926,000. The macroeconomic reports in the construction sector were also disappointing. The number of started construction of residential single-family houses immediately decreased by 6%, while this figure increased by 12% in the previous reporting month.

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The minutes of the last European Central Bank and Federal Reserve meetings also had an impact on the EUR/USD pair. The euro received a bit of support from the ECB, while the dollar, accordingly, was under pressure from the rhetoric of members of the US central bank.

In particular, the ECB's Governing Council made it clear that the central bank is not going to soften the parameters of monetary policy in the foreseeable future, although it does not exclude such a scenario (everything will depend on the behavior of inflation). This idea runs through the minutes of the last meeting of the members of the regulator.

But the members of the Fed voiced a different message. Its essence boils down to the fact that the US central bank is ready to keep base rates at the current record low level for a longer time. Figuratively speaking, the Fed intends to tolerate inflation at a level above two percent, without tightening the parameters of monetary policy. Unfortunately, the key question remains unanswered – how high the central bank will "allow" inflation to climb. However, the target level still needs to be reached, given the weak growth in the level of wages and the reduction in the number of employees. If inflation continues to stand still, the pressure on the greenback will increase, since the fate of the interest rate now largely depends on the inflationary dynamics.

The messages announced by the central banks did not become a revelation for traders. At the same time, the published minutes and the macroeconomic reports made it possible for buyers of EUR/USD to extinguish the downward momentum and return the pair to the area of the middle of the 20th figure. And there was a stalemate here: on the one hand, there is no interest in risky assets on the market (key Wall Street indices are opening in the red zone for the second consecutive day), on the other hand, the dollar lacks arguments for a second breakthrough. If we directly talk about the euro-dollar pair, then it is necessary to take into account the euro's role, which has strengthened throughout the market today (with the exception of the EUR/GBP cross-pair) - due to the above-mentioned ECB minutes and the macroeconomic reports published earlier (eurozone GDP growth of 4 quarter, ZEW indices, etc.).

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In other words, there is a positional struggle going on in the pair – rather vague and uninitiative. In such situations it is best to wait and see, apart from a kind of red flags: bottom - around the 1,1980, top - around the 1,2080. Given the background of unsuccessful assaults on the 1.2000 mark, we can assume that the main struggle will unfold for the upper price barrier.

Technique tells us the same thing. Buyers of the pair need to overcome the first resistance level of 1.2080 (the Tenkan-sen line coinciding with the middle line of the Bollinger Bands on D1) to open the way to the main price barrier, which is located at 1.2200 (the upper line of the Bollinger Bands indicator coinciding with the upper border of the Kumo cloud on the same timeframe). It is too early to talk about higher values, given the phlegmatic behavior of the price in the mid-20th figure. It is advisable to open long positions when the EUR/USD bulls overcome the first resistance level of 1.2080.

Irina Manzenko,
InstaForex के विश्लेषणात्मक विशेषज्ञ
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