As expected in yesterday's article on the main currency pair, after such an impressive and strong decline, some respite is necessary, which will take place in the form of a rate adjustment. In general, there are several types of corrections: (1) in the side range, a minor one-up to the first pullback level of 23.6 of the Fibonacci grid, stretched for a particular movement; (2) a classic standard correction to the middle of the previous movement; (3) a deep correction, which sometimes reaches 61.8 Fibo, or even higher. Since yesterday was the first day of the euro/dollar adjustment, it is still too early to conclude the extent of the corrective pullback. As usual, we will move on to the technical part of the article a little later. For now, we will talk about the main events of yesterday and what is planned for today.
In her speech yesterday, the President of the European Central Bank (ECB), Christine Lagarde, reiterated that the recovery of the European economy from the effects of COVID-19 continues to gain momentum, and the prospects for economic activity are getting better. However, mutations of the virus continue to pose a danger. At the same time, strong global demand and rising consumer spending are encouraging and could serve as a springboard for an even stronger economic recovery. Lower energy prices will offset surges in inflation. According to the head of the ECB, tightening monetary policy would be a premature measure, as it could threaten the entire process of economic recovery in the region. If we summarize yesterday's speech by Christine Lagarde, nothing radically new was said. I can add that the ECB is in no hurry to issue more hawkish comments, as the Federal Reserve did last week. At the same time, some analysts of the largest commercial banks believe that the ECB may move to reduce the asset purchase program under PEPP by the end of this year. This possibility certainly exists. However, I think that the ECB will act very carefully and will not rush. At today's economic calendar, the main event will be the report of Fed Chairman Jerome Powell on monetary policy, which will begin at 19:00 London time.
As a result of yesterday's growth, a bullish absorption candle appeared on the daily chart of the main currency pair, which implies a continuation of the exchange rate adjustment. If so, we can expect a pullback to the area of 1.1937-1.1942, where the orange 200-broken exponential moving average and the lower border of the Ichimoku indicator cloud pass. As noted yesterday, this zone could be an excellent option for opening short positions. Now let's see what kind of picture is visible in a smaller time interval.
On the hourly chart, we see that it is at 1.1937 that the black 89 exponential passes and the 23.6 Fibo level from the decline of 1.2217-1.1844. This technical nuance also indicates a high probability of profitable sales after the pair rises to the price zone of 1.1937-1.1942. The main thing is that this lift is completed. Based on the above, the main trading recommendation for EUR/USD is to sell after the pair rises to the selected price zone. I recommend that you refrain from buying at this stage of time. The opening of long positions will be considered in the consolidation of EUR/USD above the most important level of 1.2000.
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