4-hour timeframe
Amplitude of the last 5 days (high-low): 31p - 54p - 50p - 43p - 43p.
Average volatility over the past 5 days: 48p (average).
The EUR/USD currency pair ends the first trading day of the new week in a downward movement. The upward correction did not start, although we expected it on Friday (but on this day strong macroeconomic statistics from across the ocean and weak from Germany did not make it possible for the euro currency to go up), and then today. The chances of starting a correction were at its highest today, since the calendar of macroeconomic events was completely empty. That is, the fundamental factor had almost no effect on the euro/dollar currency pair. It is unlikely that traders were so disappointed with the indicator of industrial production in Italy (which fell by 4.3% y/y) that they rushed to get rid of the euro on Monday. The fact that industrial production in all EU countries is experiencing serious problems is no secret. On Friday, for example, disastrous German production plus the strongest NonFarm Payrolls data resulted in just a 40-point downward movement. And the total volatility was 43 points. Today, the pair has already passed 36 with an empty calendar. Thus, it seems that this time it is not a matter of macroeconomic data. It seems that the patience of traders simply burst. We have repeatedly talked about the paradoxical situation in recent months, which, from our point of view, was the reason for the lack of a fall in the euro below 1.0900. Although at the moment this level is still not overcome, the bears' mood this time seems to be very serious. In any case, traders definitely have such a virtually recoilless movement that can last a very long time. One negative is that the MACD indicator cannot constantly fall, so it will discharge from time to time. For example, the discharge occurred this morning, when the indicator reacted by turning upward to the pair's minimal growth (only 10 points).
Tomorrow, meanwhile, the first speech by Fed Chairman Jerome Powell will take place in the US Congress. Powell will present a semi-annual report on monetary policy to the House Committee of Financial Services. This report is not a secret, and some of its details are already known. As we expected at the weekend, the general rhetoric of the head of the US regulator will not change. The Fed will note to Congress a reduction in risks for the US economy by relieving trade tensions, as well as by revitalizing global economic growth. The US economy has been growing for 11 consecutive years, which is a kind of record. The labor market is in excellent condition, as evidenced by the latest reports on NonFarm Payrolls, as well as ADP. Unemployment has even slightly increased, however, experts say that there is nothing wrong with this, since the indicator itself remains at its lowest level. However, the Fed also notes the risks associated with the coronavirus. The report notes that the epidemic in China has already led to the closure of a number of cities, the fall of the tourism industry (for obvious reasons), and can lead to a significant drop in the economic growth rate. The Chinese economy is directly and very closely connected with the American one. Thus, the further spread of the virus in China will lead to increasingly serious consequences.
From our point of view, coronavirus is dangerous, but so far it is not a global problem. We draw the attention of traders to the fact that Powell stubbornly does not want to touch on the topic of slowing GDP growth, as well as falling industrial production in the United States. The Fed has repeatedly noted that the current level of rates is sufficient to maintain the desired business climate in the country. However, industrial production continues to decline in the past year and a half. GDP fell from 3.5% to the current 2.1% over the past year and a half. Of course, this is not such a problem, as, for example, in the EU, where GDP is 1.0%, or, for example, in the UK, where GDP can drop to 0.8% altogether. But nonetheless. These factors must be taken into account.
The technical picture still signals a continuing downward movement, and now it is even difficult to imagine how a correction should be expected. This week, in addition to Powell's speech in Congress, there will also be important macroeconomic publications. It turns out that expectations will be connected precisely with these publications. We, as before, recommend trading with the trend, not trying to guess the turns up. For this, there are indicators MACD and Heiken Ashi.
Trading recommendations:
EUR/USD continues to move down. Thus, it is recommended to continue selling the euro with the target support level of 1.0893, until the MACD indicator reverses (may discharge) or a rebound from the first target. It will be possible to consider purchases of the euro/dollar pair in small lots with the goal of 1.1045 if traders manage to gain a foothold above the Kijun-sen line, which is not expected in the near future.
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.
