4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - downward.
CCI: -165.5838
The EUR/USD currency pair on Monday continued the movement of Friday, that is, it continued to almost collapse. No correction, just a drop. Thus, we have witnessed not quite adequate behavior of the euro/dollar pair, although it has been trading logically and reasonably in recent months. However, the drop in quotes in the last three trading days is still very difficult to explain. On the one hand, it seems that the strengthening of the dollar has been brewing for a long time. Recall that the upward trend in the pair has been maintained for almost 12 months, so it would have been good for the dollar to correct downward by 500-600 points for a long time, but, on the other hand, we have already figured out that the fall of the American currency over the past year was well-founded by fundamental factors. Thus, it is quite difficult to say why the collapse began last Thursday. Again, strong macroeconomic statistics were released in the United States last Thursday. But how many such strong reports have been ignored recently? Hundreds. On Friday, it became known about the attack of the US Air Force on Syrian objects, however, it is unlikely that this event alone caused such a strong strengthening of the US currency. And on Saturday, a factor that could provoke a new prolonged fall in the US currency became known. The lower house of the US Congress has approved a new $ 1.9 trillion stimulus package proposed by Joe Biden. However, more on this below. Thus, there were simply no good reasons for such a serious collapse in quotes. Many explanations for why the dollar is getting more expensive look frankly "far-fetched". We tend to believe that the reason lies in the combination of several important factors, each of which separately would cause a slight strengthening of the US dollar. But all together, they led to an increase of 200 points. By the way, 200 points is not a strong movement. From February 5 to 10, the pair passed the same 200 points up, without a rollback. Thus, it is impossible to say that the US dollar has strengthened strongly. Thus, we also believe that there is no need to panic now, nothing extraordinary has happened.
Back to Joe Biden's stimulus package, which was approved by the House of Representatives on Saturday. In principle, there is not much to tell here. The Lower House voted. 219 deputies voted yes and 212 deputies voted no. As usual, the Republicans voted no. Previously, we believed that Joe Biden would not go into open conflict with the Republicans, who have repeatedly opposed such serious assistance to the economy, considering it excessive. However, it turned out that the US president would bend the line of Donald Trump, who was not going to take into account the opinion of the opposition party. Well, he has every right to do so. Now, all three branches of government are fully controlled by the Democrats. And for this, we should say thanks to Donald Trump. Now, for at least the next two years, all power in the States will belong to the Democrats. The "Biden bill" must now be approved by the Senate. An additional $ 2 trillion will flow into the American economy in 2021. We have already said repeatedly that this threatens the US dollar. In our opinion, the entire upward trend of the last year was associated with an increase in the money supply in America. Simply put, the US economy was pumped with several trillion dollars, the amount of money increased, but the demand for dollars did not become higher, so the US currency collapsed on all fronts. The beginning of the year is still for the US currency. In 2021, the pair has not yet managed to update its highs. However, if you look at the 24-hour timeframe, it becomes clear that the pair has already corrected by 400 points. This may well be enough to resume the upward movement. From this point of view, the fall of the last three days confuses all the cards in your hands. However, this is the foreign exchange market, everything is not perfect and simple here. You always need to be prepared for various kinds of unforeseen situations. One of them has just emerged in recent days. The most interesting thing is that even with the fact that buyers have released the pair so far, the bears have not become stronger from this. They still also need a reason to push the pair down. And over the past year, they have not been able to find any. Therefore, despite the strong decline in quotes in recent days, the prospects for the US dollar still look very vague.
In the short term, it looks as if the downward movement between the 19 and 20 levels will end. Most likely, in the coming days, there will still be a pullback to the top, after which there will be another round of downward movement, during which it will become clear that no factors are supporting the US currency right now.
The volatility of the euro/dollar currency pair as of March 2 is 79 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1959 and 1.2117. A reversal of the Heiken Ashi indicator to the top can signal a round of corrective movement.
Nearest support levels:
S1 – 1.2024
S2 – 1.1963
S3 – 1.1902
Nearest resistance levels:
R1 – 1.2085
R2 – 1.2146
R3 – 1.2207
Trading Recommendations:
The EUR/USD pair continues to move down. Thus, today it is recommended to stay in short positions with a target of 1.1963 until the Heiken Ashi indicator turns up, which will indicate the beginning of a correction. It is recommended to consider buy orders if the pair is fixed above the moving average with targets of 1.2146 and 1.2207.
