4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: -79.1375
The EUR/USD currency pair at the beginning of the new trading week is trading very sluggishly and stands in one place. The volatility is ultra-low and it seems that traders are frozen in anticipation of the meetings of the Fed and the Bank of England, which are due to take place this week. Of course, a lot of attention is always focused on the Fed meeting. Especially now, when treasury bond yields are rising in the United States and there is a serious threat of high inflation, which is unknown how central banks will "extinguish". Also, when the US Congress approved the injection of another $ 2 trillion into the economy. All these events cannot remain without attention from Jerome Powell and the markets simply do not want to force events before such an important event. From a technical point of view, the downward trend is now maintained, as the price is located below the moving average line. However, at the same time, this trend is extremely weak, since at any time there may be a consolidation above the moving average. Thus, we would classify the current state as flat. It is also worth noting that in the long term, there is a high probability of a correction (downward movement), and for the whole of 2021, there is a high probability of resuming the upward trend for the euro/dollar pair. However, a lot will now depend on central banks and governments, which have pumped up the economy with liquidity, and what they will do next is unknown.
From the simplest course of the economy, it is known that if the money supply increases, but the number of goods and services does not increase, then this leads to inflation. The fact that inflation has not yet grown above 2-3% with the current injections of trillions of dollars and euros into the American and European economies suggests that people during the pandemic have become much more thrifty, saving every penny they have. Indeed, no one knows how much longer the pandemic will continue. Vaccination has started all over the world, however, in many European countries, it has already been suspended (by AstraZeneca) due to the high probability of too dangerous side effects. And the pace of vaccination in the European Union leaves much to be desired. However, given the ultra-low rates offered by central banks, as well as ultra-low rates of return on government bonds, investors have little choice. Either invest in real estate, gold, cryptocurrencies, or stocks. This is, of course, a good choice, but not all people in the world are investors and generally have a desire to deal with stocks or gold (and even more so with cryptocurrencies), and real estate savings may not be enough. Moreover, the US stock market has been inflating for several years in a row, and many experts predict that this "bubble" will soon burst. I don't want to talk about cryptocurrencies. Given the fact that bitcoin is not worth anything on its own, its price of about $ 50,000 is simply brain-blowing. Thus, these investment tools, and the process of investing in the economy itself, are not suitable for all people. According to experts, in many developed countries, such as Germany, the United States, or France, during the pandemic, the population has accumulated huge amounts of money, which they will start spending as soon as the pandemic is over. Thus, it is only a matter of time before inflation rises around the world. Moreover, if, for example, the Fed starts raising rates to slow down inflation, it will cause rates to rise in other countries since, without this step, the strongest flow of capital from low-rate countries to high-rate countries will begin. In general, the world economy will be in a fever for a few more years for sure. And at the very least, the fever will not end until the coronavirus is finished. And it is unlikely that this will happen in 2021. It will be good if the population of the richest countries can be vaccinated this year and there will be no long-term side effects from the vaccines. It is good if all created vaccines work equally well with all COVID-2019 strains and mutagens. So far, we see a slightly different picture. Vaccination has begun in the EU, and many countries there have declared a "third wave" of the pandemic. And what can we say about the countries that simply do not have access to vaccines and who will receive it last?
Also, don't forget that by pumping trillions of money into the economy, central banks and governments inflate their balance sheets and create huge budget holes and growing public debt. These debts and holes will have to be covered and patched up somehow. Thus, most experts believe that in the next few years, a wave of tax increases will sweep around, since money does not come from anywhere in the budget. Of course, they can be printed in any quantity, which will cause even greater inflation sooner or later. However, this is still an extreme method. Thus, the world after the end of the pandemic will face a real threat of a new decline in economic growth due to the growing fiscal burden on business. At any moment, the Germans and the Americans may decide to start spending their money hidden under the pillow, which will cause new global changes in the economy. All this will affect business and investment, and many will not be able to withstand this instability. And here it is also worth remembering about unemployment, which has increased in absolutely all countries during the pandemic. And unemployment is an additional burden on the budget since you need to pay unemployment benefits. In general, if you try to describe everything that will happen in the economy in the next five years, the word "instability" is best suited.
The volatility of the euro/dollar currency pair as of March 17 is 67 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1840 and 1.1974. A reversal of the Heiken Ashi indicator to the top will signal a new round of upward movement.
Nearest support levels:
S1 – 1.1902
S2 – 1.1841
S3 – 1.1780
Nearest resistance levels:
R1 – 1.1963
R2 – 1.2024
R3 – 1.2085
Trading recommendations:
The EUR/USD pair is now located just below the moving average, so there is a slightly better chance of continuing the downward movement. Thus, today it is recommended to stay in short positions with targets of 1.1902 and 1.1841 until the Heiken Ashi indicator turns up. It is recommended to consider buy orders if the pair is fixed above the moving average, with the first target of 1.2024.
The material has been provided by InstaForex Company - www.instaforex.com