4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - down.
CCI: -84.5626
The first trading day of the week was completely sideways with minimal volatility. The euro/dollar pair has been trading all day as if it is not currently near three-year lows. The correction did not start on Monday, February 17, although an empty calendar of macroeconomic events could have contributed to its beginning. However, after several months, when the bears gave up positions on the approach to the minimum price values, the situation changed to the opposite. Now the bears continue to hold the initiative in their hands, despite the lack of a fundamental background.
On Tuesday, the macroeconomic background for the EUR/USD pair will remain extremely weak. However, judging by the results of the first trading day of the week, a strong fundamental background is not particularly necessary for traders now. However, there will be just a couple of reports that are more or less significant. The first is an index of economic sentiment from the ZEW Center for European Studies for the European Union. The graph of all changes in the indicator over the past three years is placed above. As you can see, over the past year and a half, the index has been mostly below zero, which coincides with a temporary slowdown in the EU economy and a decline in the growth rate of industrial production. However, in the last two months (even 5 months), there has been a strong increase in the indicator and it is even difficult to say what it may be associated with. It should be understood that this index is not a business activity, it only reflects the mood of investors. Thus, the mood may be good and the key macroeconomic indicators of the European Union will continue to decline. In any case, there will most likely be no reaction to this report. Thus, we recommend that traders simply note the real value, whatever it may be.
The second indicator is the ZEW Institute economic sentiment index for Germany, where the situation is approximately the same. The indicator has been in the negative zone for the last year and a half, but it has been growing in the last 5 years. Once again, first of all, ZEW indices are not important reports that traders respond to. Second, the growth in economic sentiment does not affect the key indicators of the German economy.
Thus, at the beginning of a new trading week, nothing changes for the European currency. There are no signs of improvement in the economic situation. No positive news. The European Central Bank remains silent on monetary policy issues. Christine Lagarde pays more attention to structural changes in the bank. The ECB's monetary committee is considering whether to lower the inflation target, which in recent years, despite all efforts, has not been achieved.
From a technical point of view, the downward movement continues, since this is what the "fast" indicator Heiken Ashi signals. Since any further decline will lead to the renewal of three-year lows, the pair does not have any important psychological levels from below. The nearest Murray level is "1/8"-1.0803. Both channels of linear regression are directed downward, as is the moving average line, which in total means a downward trend in the long-term, medium-term, and short-term plans. The CCI indicator has been near the oversold area for two weeks, but the persistent desire of traders to sell does not allow the euro to roll back from the current lows.
The average volatility of the euro/dollar currency pair has decreased to 41 points per day and is again approaching the "minimum" value. On average, the pair continues to pass 40-50 points per day, but the last two days ended with minimal volatility. On Tuesday, we expect movement between the borders of the volatility corridor of 1.0792-1.0874, but given the macroeconomic background, it is unlikely that at least one of the borders will be reached, and volatility will increase.
Nearest support levels:
S1 - 1.0803
S2 - 1.0742
S3 - 1.0681
Nearest resistance levels:
R1 - 1.0864
R2 - 1.0925
R3 - 1.1047
Trading recommendations:
The euro/dollar pair continues to move down. Thus, sales of the euro with targets of 1.0803 and 1.0783 remain relevant now, which can be kept open until the Heiken Ashi indicator turns up. It is recommended to buy the EUR/USD pair no earlier than the bulls cross the moving average line with the first target of 1.0925.
In addition to the technical picture, you should also take into account the fundamental data and the time of their release.
Explanation of the illustrations:
The highest linear regression channel is the blue unidirectional lines.
The lowest linear regression channel is the purple unidirectional lines.
CCI - blue line in the indicator window.
Moving average (20; smoothed) - blue line on the price chart.
Murray levels - multi-colored horizontal stripes.
Heiken Ashi is an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com