Good afternoon, dear colleagues!
Despite a positive report published by the US Labor Department on Friday, the US dollar began this trading week with a significant drop against the euro. This decline could be explained by some technical reasons and by the fact that the US economic recovery after the virus-induced crisis has been already priced in by traders. At the same time, the EU is trying to solve problems concerning the vaccination program. The paces of vaccination are significantly slower than expected. As we have already mentioned, France's authorities have to switch to tighter containment measures as France turned out to be the most susceptible country to the coronavirus infection. After Germany, France is the second largest economy in the eurozone. All these factors together with the strong nonfarm employment change data and unemployment rate figures should have boosted the US dollar against the euro. In fact, the situation is the opposite.
Daily
Yesterday, we analyzed weekly and daily charts, predicting a rise in the euro/dollar pair, which may be considered as a correctional movement. There is only little difference between a correctional movement and a trend reversal. However, it is too early to talk about it. Yesterday, the euro/dollar pair rose and closed the day at the level of 1.1811. This is significantly above the Tenkan red line of the Ichimoku indicator and an important level of 1.1800.The pair also broke the resistance level of 1.1804, where on March 26 were logged the highest levels. Today, the pair dropped to 1.1796 and then returned to 1.1817. According to the technical analysis, on the daily chart, the pair has all chances to go on gaining in value. The main factor of the ongoing rise is the reversal model of the Morning Star candlestick.
In this case, bulls should break a strong resistance level located at 1.1845. However, the situation is aggravated by the orange 200 EMA at the 1.1827 level and the 23.6 Fibonacci retracement from 1.2242-1.1703 situated at the level of 1.1830.I suppose that all these formations may act as strong resistance. I may try to predict that a break of 1.1845 will allow the pair to move towards the 38.2 Fibonacci level and the blue Kijun line located at 1.1909. To change the market situation, bears should push the price lower the Tenkan line and close the trade below the yesterday's low of 1.1737, where the pair found a strong support level. Taking into account the reversal model of the Morning Star candlestick, the pair is likely to continue rising.
H1
On the one-hour chart, a big bullish candlestick proves the pair's intention to increase. Those who prefer aggressive trading may buy the euro/dollar pair right now. Those who prefer cautious trading may wait until the pair reaches the level of 1.1800. After that, traders may open positions from the mentioned level. They could open sell positions, if there are reversal bearish candlesticks near the level of 1.1845 on the one-hour and four-hour charts. The pair is likely to face strong resistance near 1.1845. That is all for now.
I wish you successful trading!
