4-hour timeframe
Amplitude of the last 5 days (high-low): 28p - 28p - 36p - 32p - 79p.
Average volatility over the past 5 days: 41p (low).
The first trading day of the new week, as we expected, held a downward movement for the EUR/USD pair. In the latest reviews, we pointed out that the last two trading days for the euro were moving upward, which required at least a correction. We pointed out that there are still few fundamental and macroeconomic reasons for the euro's growth. Once again we mentioned the paradoxical situation, which does not allow the US dollar to continue to rise in price, and the euro currency to start growth. As a result, a downward correction began on Monday, February 3. Traders began to buy the dollar again and get rid of the euro, even despite the macroeconomic data that were published today in the EU and the United States. At the moment, the euro/dollar has reached the critical Kijun-sen line, therefore, there is a chance of a rebound and the resumption of an upward movement, but we stick to our opinion: it is possible for the euro, but hardly strong or long.
Macroeconomic publications were present today and could have a certain impact on the movement of the euro/dollar pair. In the largest countries of the European Union, indicators of business activity in manufacturing sectors were published today. It was the data on business activity in industry that caused the greatest concern among investors when it came to the European Union and the United States. Problems of the industrial sector and the decline in GDP were associated with the fall in business activity in production. Thus, much depended on today's numbers. Looking a little ahead, we note that all these figures were ignored by market participants. At least all European numbers are accurate. The business activity index in Spain increased to 48.5, in Italy - up to 48.9, in France - up to 51.1, in Germany - up to 45.3, in the European Union - up to 47.9. Although not in all countries the growth was tangible compared to December, but everywhere there was a growth. Although most of the indicators remained in the recession zone, there was an improvement everywhere. Traders ignored this data, as we warned in the morning. The fact is that the technical need for correction simply turned out to be stronger.
But frankly pleased with the data from overseas. In recent weeks, we have repeatedly called into question the "good state of the US economy," which Jerome Powell spoke about at all recent Fed meetings. Recent weeks have indeed been weak enough for macroeconomic statistics from the United States. However, the new month openly pleased traders with at least an ISM indicator of business activity. It is the PMI ISM index that is considered the most important and significant, and it is this index that unexpectedly showed a decline in the last two months and went below the level of 50.0. In January, business activity recovered to the value of 50.9. The Markit business activity index also turned out to be higher than the forecast value and amounted to 51.9. Thus, both key Monday indexes in the US were in favor of the US currency. You can also add that the index of gradual acceleration of inflation ISM exceeded forecast values and amounted to 53.3, which is also a positive factor. In general, after a year and a half reduction in production growth rates, finally this indicator can begin to accelerate again, which will only add strength to the US dollar. But in the European Union, despite the restoration of business activity indicators in production, most of them remain in the recession zone, so the general situation remains the same: the EU economy remains weaker than the US economy in all respects. Thus, in the long run, we still expect the dollar to strengthen, if not for the paradoxical situation...
Meanwhile, one of the senators, Republican Lamar Alexander, said that all the articles under which Donald Trump is accused by the Democrats are not enough to impeach the president. In essence, this means that on a vote on Wednesday, almost 100% of Trump will be justified. Alexander said that Trump's appeal to Ukrainian President Vladimir Zelensky with a request to investigate the Biden activities in Ukraine is not a "serious violation". The senator calls Trump's actions "a mistake." "I think if the president was dissatisfied with the actions of Joe Biden and Hunter Biden in Ukraine, he should contact the US Attorney General William Barr," Alexander said. The senator also added that Trump's actions are very far from "treason, bribery and other serious crimes."
From a technical point of view, the euro/dollar may bounce off the Kijun-sen line and resume moving up. However, the buy signal from the Ichimoku Golden Cross is currently weak, since quotes failed to leave the Ichimoku cloud. Therefore, if longs are considered now, then it would be in extremely small lots.
Trading recommendations:
The EUR/USD pair began to adjust against a new upward trend. Thus, it is recommended to buy the euro in small lots while aiming for the resistance level of 1.1128, if the pair bounces off the Kijun-sen line. It will be possible to consider selling the euro/dollar pair with goals of 1.1024 and 1.0956, if traders manage to overcome the critical line.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicators window.
Support / Resistance Classic Levels:
Red and gray dashed lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movements:
Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com