4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - sideways.
CCI: 72.7213
The EUR/USD currency pair spent the first trading day of the new week in a not too strong upward movement. After the bears failed to overcome the moving average line, the upward trend continued, and the upward movement resumed. Thus, the general conclusions about the prospects of the euro/dollar currency pair remain the same. On Monday, there were no important news or events in the world. It's already traditional. Thus, although traders are already not too fond of macroeconomic statistics, yet yesterday they had nothing to react to. As a result, a rather sluggish trading. However, about the euro currency, this judgment is applicable in the last two weeks. The volatility indicators (shown at the bottom of the table) have fallen to low values and are not going to grow yet. The US dollar is still under pressure from the market, as there are still "global fundamental factors" at work, which have a huge impact on the mood of investors and the balance of supply and demand for the euro and the dollar. Thus, in the medium and long term, we expect further strengthening of the euro currency, which is better called the fall of the US dollar.
Should I also say that traders did not pay much attention to the rather high-profile political process in the United States, which concerned the impeachment of Donald Trump? It makes sense to talk about the prospects of certain political figures when they are in power and can influence the economy and international politics of a country (and sometimes the whole world). Trump has already retired. However, he promised to return in 2024 as president. Thus, more attention of market participants was rightly paid to the political crisis in Italy. In general, Italy has become a rather problematic member of the European Union in the last decade. Then Rome is accused of spending money and lack of desire to save, then Italy does not fit into the norms of the European Union in terms of public debt and budget, then "anti-European" sentiments flare up in Italy and the country is "already preparing to repeat the fate of the UK". Italy suffered the most from the "coronavirus". Now it is Italy that is destined for the largest share of the EU economic recovery fund – about 209 billion euros, of which about 80 will be provided in the form of grants. It turns out that all countries have chipped in money (they have not chipped in yet, but they will do so in the future) to pull out the most affected economies, which, according to the assurances of the "stingy four", have found themselves in such a difficult situation because they refuse to live within their means. Now here is the political crisis that began after the demarche of the "Living Italy" party, which separated from the ruling coalition because of the quarrel between Prime Minister Giuseppe Conte and the party leader Matteo Renzi. The party "Living Italy" is small, but, as often happens, due to the absence of a small screw, a vast mechanism stops working. This also happened in Italy. "Living Italy" withdrew from the coalition because serious disagreements between its leader and practically all ministers arose, and immediately the ruling majority ceased to be such. All this happened at a time of severe epidemiological and economic crisis. At a time when the country needed to be "lifted from its knees". Italian President Sergio Mattarella allowed Giuseppe Conte to form a new ruling majority in Parliament, however, all the Italian political forces failed to agree. As a result, everything fell apart like a house of cards. Conte submitted his resignation. However, according to the assurances of the Italian media, he did not intend to leave the big politics. He was going to get permission from the president to form a new government, however, Mattarella decided otherwise and invited Mario Draghi to form a new government. He fulfilled the president's instructions and on February 13, the new government took the oath of office, which so far, at least temporarily, puts an end to the political ordeal of the country. However, there are no fewer problems in Italy. The fact is that 209 billion euros will not just go to the accounts of the Italian Central Bank. Rome should provide a list of clear reforms that will show Brussels that the country does not just want to accept the payment of 209 billion and spend it as it sees fit. We need a clear plan for how Italy is going to manage the money. This is the plan that the new government will develop. Of course, it is unlikely that it will be such that Italy will not receive the money. Mario Draghi, who led the ECB for a long time and is considered the savior of the euro, has vast connections in Brussels and knows better than anyone what they want in Brussels, what the European Parliament and the European Commission will agree to, and what they will not.
Thus, all these events coincided with a small correction of the European currency, which failed to go below the moving average. Therefore, the chances of continuing the upward movement are high. Of course, it is not the Italian crisis that is most worrying the markets right now. And a new stimulus package that could be approved by Congress in the near future. That would mean another $ 2 trillion pour into the economy. We continue to believe that this will be a long-term downside factor for the US currency. It should also be remembered that on the 24-hour timeframe, a strong buy signal was formed in the form of a rebound from the Senkou Span B line and the 50.0% Fibonacci level. Thus, in the long term, there is also a clear signal in favor of a new fall in the dollar.
The volatility of the euro/dollar currency pair as of February 16 is 45 points and is characterized as "low". Thus, we expect the pair to move today between the levels of 1.2088 and 1.2179. A reversal of the Heiken Ashi indicator downwards may signal a round of downward correction.
Nearest support levels:
S1 – 1.2085
S2 – 1.2024
S3 – 1.1963
Nearest resistance levels:
R1 – 1.2146
R2 – 1.2207
R3 – 1.2268
Trading recommendations:
The EUR/USD pair is trying to continue the upward movement after the rebound from the moving average, however, it cannot yet overcome the level of 1.2146. Thus, today it is recommended to open long positions with targets of 1.2146 and 1.2179 in the case of a new rebound from the moving average or in the case of a reversal of the Heiken Ashi indicator to the top. It is recommended to consider sell orders if the pair is fixed below the moving average with a target of 1.2024.
