Bulls of the EUR/USD pair, on the wave of the upward momentum, crossed the 1.2000 mark, thereby claiming their rights to the territory of the 20 figure. However, prospects for the upward trend look vague. After all, it is one thing to gain positions as a result of a successful tactic, and it is quite another to keep the heights. After some hesitation, traders did not dare to storm the intermediate resistance level of 1.2070 (the upper line of the Bollinger Bands indicator on the four-hour chart). As soon as the pair approached the limits of this target, the upward momentum faded: first, the dollar index stopped falling, and secondly, traders began to take profits, reasonably deciding not to take risks. As a result, the pair initially traded in a narrow price range, and then the EUR/USD bears tried to seize the initiative, pulling the price to the bottom of the 20th figure.
The US dollar received a bit of support as a defensive asset. Over the past day, anti-risk sentiment among traders has slightly increased, against the background of gloomy sentiment in Asian markets. The coronavirus came back to life, and as always, in a negative context. Experts of the World Health Organization reported that the number of new cases of infection has increased in all regions of the world with the exception of Europe (there was a three percent decrease). But there was a huge jump in Southeast Asia: the weekly increase in new cases there increased by almost 60% (!) compared to the previous week. The most severe situation is observed in India, where another outbreak of the disease was recorded. In the last 24 hours alone, 295,000 new cases of COVID were detected there. And the total number of coronavirus patients in the country has reached 15.6 million. The outbreak in India has led to an increase in the number of infections in Southeast Asia as a whole, according to the WHO.
Against the background of such trends, the stock indices of the countries of the Asia-Pacific region showed negative dynamics, reflecting the pessimistic mood of investors. In particular, the Japanese Nikkei 225 index fell by almost two percent this morning. Asian stocks are now experiencing their biggest drop in a month. The beneficiary of this situation was the US dollar. However, the dollar bulls failed to fully convert the decline of the Asian markets in their favor: the dollar index stopped falling and showed a relatively small correction. That, in fact, is all.
The EUR/USD bears also failed to implement the "minimum program" - the pair only approached the bottom of the 20th figure, but could not go down a step lower, to the support level of 1.1970 (the lower border of the Kumo cloud on the daily chart, coinciding with the Tenkan-sen line).
It is obvious that traders of this pair are waiting for tomorrow's European Central Bank meeting. In the run-up to this event, traders do not risk "investing" in either purchases or sales.
According to most analysts, the April meeting will formally be a "pass-through" - the ECB will keep all the parameters of monetary policy in the same form. This fact will coincide with the expectations of the market. At the same time, the main points of the accompanying statement and the rhetoric of ECB President Christine Lagarde may weigh on the euro. Let me remind you that over the past three weeks, several representatives of the ECB (in particular, Francois Villeroy) have stated that the central bank needs to indicate the thesis of the admissibility of exceeding the target inflation level. If this phrase is indeed included in the text of the accompanying statement, the euro may come under significant pressure. After all, this, in particular, will mean that the ECB's policy will remain accommodative for a longer period of time.
Let me remind you that the latest report on the growth of European inflation reflected the weak growth rates of the main indicators. The core consumer price index slowed to 0.9% (a downward trend is recorded for the second consecutive month), and the main index came out at 1.3% with a forecast of growth to 1.4%.
It is also worth noting that the central bank may be concerned about the euro's growth. Earlier this year, as soon as the pair crossed the 1.20 level, the ECB drew attention to this fact. In particular, the chief economist of the ECB, Philip Lane, said that the euro is "unacceptable for the central bank." Such rhetoric alarmed traders: rumors spread around the market that the ECB would conduct a currency intervention to devalue the single currency.
Thus, the results of tomorrow's ECB meeting may not be in favor of the euro. Recently, the head of the ECB said that the European economy resembles "a patient who has emerged from the crisis, who stands on two crutches." By "crutches," she meant monetary and fiscal stimulus. At the same time, she stressed that appropriate support is needed throughout the recovery period. I believe that she will voice this idea tomorrow - only in a more detailed form. The slowdown in inflationary growth, as well as the prolongation of lockdowns in key European countries, may strengthen the dovish mood of ECB members.
From a technical point of view, the support level (the first target for the downward movement) is located at 1.1970 (this is the lower limit of the Kumo cloud on the daily chart, coinciding with the Tenkan-sen line). The resistance level is located one hundred points higher, at 1.2070 (the upper line of the Bollinger Bands indicator on the four-hour chart).
