4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: 65.1107
The EUR/USD currency pair continued to adjust near the moving average line during the first trading day of the week. During the day, the volatility was at a minimum, thus, it was not possible to really overcome the moving average or bounce back from it. Thus, the further movement of the pair will depend on the moving average. If it is overcome, then the upward movement can continue, if there is still a rebound – then the downward movement will resume. In general, the US currency continues to remain in the leaders of 2021, although it can not be said that it directly rose very much in price during the first five weeks of the new year. Nevertheless, it has become more expensive, which it has not been for a long time. So far, the "foundation" still allows the dollar to count on a small increase, so the bears need to take advantage of the moment.
While everyone in the United States is discussing and waiting for the approval and adoption of a new stimulus package that will help the economy continue to recover from the pandemic crisis, new problems are brewing in the European Union. We should immediately make a reservation, so far these problems and the entire situation do not cause serious concerns. However, in the long term, it may end very badly for the Eurozone. It will focus on Italy and its political crisis, which it has fallen into in recent weeks. It should also be noted immediately that Italy is a rather problematic country for the European Union. On the one hand, its economy is strong and is one of the five strongest in the European Union, on the other hand, it is this country that regularly creates problems. A couple of years ago, the EU government was at war with Rome over non-compliance with EU regulations on the budget and the maximum threshold for public debt, threatening to impose a fine. A little later, rumors began to circulate that Italy would be the next to leave the European Union after the United Kingdom. And when the coronavirus pandemic began, it was the Italian economy that suffered some of the greatest losses. Now there is a political crisis. The former government has collapsed, the new one has not been created, and Mario Draghi, who is familiar to currency traders as the head of the European Central Bank, will clean up the whole situation. At the moment, the following is known: Italian President Sergio Mattarella has already instructed Mario Draghi to form a new cabinet. If Draghi gathers the government and it is approved by the Parliament, then it will be possible to consider that the crisis is overcome and it will be possible to breathe freely. However, it is also quite possible that the Parliament will reject the composition of Mario Draghi's ministers, then the country will have to wait for new parliamentary elections. And this is the main danger for Italy.
First, elections during an economic and epidemiological crisis are not the best thing to do. Now the country needs leaders who will restore it after the collapse of GDP. We need leaders who will distribute EU funds as efficiently as possible. And there is absolutely no need for political perturbations. At this time, the government did not fulfill its direct duties at all. All the congressmen and senators seemed to be thinking only about how to get power into their own hands or keep it. About the same thing can happen in Italy. Secondly, for more than a year, there have been rumors that Italians are dissatisfied with the attitude of Brussels, and "anti-European sentiments" are maturing in the country. Of course, after the approval of the fund for economic recovery after the pandemic for 750 billion euros, of which 209 will go to Italy, the dissatisfied exclamations from the "boot" subsided. At the moment, this fund has not even been formed and has not yet begun to be distributed among the beneficiaries. Therefore, if the parliamentary elections are held right now, then, most likely, the parties proposing to start a "divorce" with the European Union are unlikely to gain enough votes. However, hardly anyone can now predict the outcome of a possible election. "Eurosceptics" may not win the elections, but at the same time strengthen their positions in Parliament. Accordingly, anti-European sentiments will continue to develop in the country and, perhaps, not now, but in 5-10 years, we will witness another independence referendum.
However, there is also the possibility that Draghi's government will simply not be approved by the parliamentarians. For example, the most powerful opposition party, the 5 Star Movement, has already made an official statement that it does not support Mario Draghi. However, it is Draghi who can help the country out of the crisis, as he has great connections in Brussels, and the crisis that has formed in Italy is related to money. Recall that Italy will be allocated about 209 billion euros, of which about 82 billion - in the form of grants. However, any EU member state can block the allocation of aid to any country if it does not send it to its intended destination. The economic recovery fund is essentially borrowed money. That is, all 27 EU member states will create it by sending funds borrowed on domestic markets to it, then redistributing them among the most affected countries. Thus, the control over the use of budget funds will be huge. In Italy, at the moment, they have not developed a clear plan in which areas to direct European money. Many believe that it is Draghi who will be able to negotiate with Brussels in the event of problems with the targeted use of funds or not enough of them for a full recovery of the economy. However, money is money, but deep structural reforms are also necessary. Draghi has already said that to get out of the crisis, it is not enough to simply finance the most problematic areas and industries. We need to work with the inequality in the standard of living of Italians and invest in unemployed young people. Also, not only the government but also ordinary Italians will have to face the resolution of the crisis. Italians have been accused of excessive spending for several years in a row. Especially those countries that are now forced to "chip in" so that the economy of the peninsula does not collapse completely. However, Rome is not too inclined to the economy. That is why its national debt has already grown to 162% of GDP. This problem should be solved, and the national debt should be reduced. And every Italian will have to pay this debt. In general, there are many problems in Italy, but now we need to wait for the creation of the Draghi's cabinet and the Parliament's vote for this composition.
The volatility of the euro/dollar currency pair as of February 9 is 71 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1979 and 1.2121. A reversal of the Heiken Ashi indicator downwards may signal a new round of downward 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 be in an upward correction. Thus, today it is recommended to trade down with the targets of 1.1979 and 1.1963 if the price bounces off the moving average line. It is recommended to consider buy orders if the pair is fixed above the moving average, with targets of 1.2085 and 1.2121.
The material has been provided by InstaForex Company - www.instaforex.com