4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -176.1277
The EUR/USD currency pair continued a strong downward movement during the last trading day of last week. As we have said in previous articles, it could have been triggered by a whole group of factors. For example, on Friday, for the first time in a long time, a very strong report on NonFarm Payrolls was released, which could not but provoke a new strengthening of the US dollar. The unemployment rate also fell. However, the most interesting thing is that the euro/dollar pair fell all day. At the same time, again, it is impossible to say that the fall was strong, especially looking at the lower timeframes. Rather, it was calm. Thus, we tend to believe that both technical factors (the need for a correction after 11 months of growth), fundamental factors (the absence of an approved stimulus package from the US Congress at that time), and macroeconomic factors (strong statistics from overseas) are working in favor of the dollar. However, we still tend to believe that the US dollar will not rise for too long. Already this weekend, it became known that the US Senate approved Joe Biden's "plan to save the economy", so in the coming weeks, the US economy will begin to pump money again. But more on that below. Here we would like to note that the dollar can grow for as long as you want. There is a trend - it is this trend that needs to be worked out. When there are signals that will signal the end of the downward trend, then you will need to prepare for a new upward trend. Now you just need to keep in mind the main fundamental factors and understand that the US currency can complete its growth at any time.
A new $ 1.9 trillion stimulus package has been approved by the US Senate. This was announced on Saturday. It is noteworthy that only 49 senators voted against this bill. Thus, the decisive vote of US Vice President Kamala Harris was not required. It is reported that the Senate session lasted more than a day. There was a long debate about the "rescue plan", the Republicans wanted to make about three dozen amendments to the current draft, but in the end, they failed. "Our people have suffered a lot and for a long time. This aid package is entirely designed to alleviate the suffering of the American people and meet the nation's immediate needs. We will start with the fight against the "coronavirus" and vaccination. The funds will be used to expand the production of vaccines and accelerate their distribution. I think we will have enough doses by mid-May," US President Joe Biden said. "It's been a long day and a long night, but it's a new day, and we're telling the American people that help is on the way," said Chuck Schumer, the Democratic leader in the Senate. Now the bill must be sent back to the House of Representatives, which previously approved it, for a final vote, after which the document will go to Joe Biden for signature. The lower house is expected to vote on March 9.
Thus, in the coming weeks, $ 2 trillion can be directed to the American economy. We have previously concluded that the fall in the US currency over the past 12 months could be directly related to a strong increase in the US money supply. Thus, another two trillion dollars can have a very negative impact on the exchange rate of the US currency. So far, the dollar is growing, but it is growing too fast and almost recoilless. We do not believe that such a sharp increase could have been triggered by an increase in the yield of American treasuries, especially since, as we have already said, this indicator began to grow not a week ago, but much earlier. However, it should also be noted that the markets are undoubtedly reacting to this factor now. Therefore, if the yield continues to grow this week, then the dollar can continue to grow. Although after a total drop of 350 points over the past week and a half, we expect at least a pullback to the top, which may just happen at the beginning of a new trading week.
From a technical point of view, the decline continues and both linear regression channels have already turned down. Therefore, we have a trend both in the long term and in the short term. The Heiken Ashi indicator painted the last bars in blue, so at the moment there is not even a single sign of the beginning of a correction. Therefore, those traders who are still in sales can continue to stay in them. There is little hope for the level of 1.1887 – this is the 61.8% Fibonacci level from the last two-month growth of the euro/dollar pair. A rebound from this level can trigger a round of upward movement or even a resumption of a long-term upward trend, as well as a rebound from the 50.0% Fibonacci level. But overcoming it will significantly increase the chances of continuing to move south. The levels of 50.0% and 61.8% are the strongest and, if there is no rebound from them, it usually continues to move.
The volatility of the euro/dollar currency pair as of March 8 is 87 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.1823 and 1.1997. A reversal of the Heiken Ashi indicator to the top can signal a round of upward correction.
Nearest support levels:
S1 – 1.1902
S2 – 1.1841
Nearest resistance levels:
R1 – 1.1963
R2 – 1.2024
R3 – 1.2085
Trading recommendations:
The EUR/USD pair continues to move down. Thus, today it is recommended to keep open 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 1.2085.
The material has been provided by InstaForex Company - www.instaforex.com