4-hour time frame
Amplitude of the last 5 days (high-low): 157p - 119p - 92p - 125p - 143p.
Average volatility over the past 5 days: 128p (high).
If you try to describe everything that is happening now in the currency market in one word, then "panic" is best. However, we talked about this in recent days. There is panic (in the literal sense of the word) in the markets, respectively, there is currently no logic in the movement of the EUR/USD currency pair. It is impossible to predict how long the collapse of the US currency will last. Moreover, it's impossible to even say exactly why the collapse of the quotes of the dollar continues. We have already said that the collapse of the US stock market cannot be considered the only reason for the decline in the US currency. In the same way, it is impossible to consider the reason for such a strong decline in the dollar and a decrease in the key Fed rate. It can be recalled that rates remain much lower in the European Union, and moreover, the threat of the spread of the "coronavirus" is likely to lead to that the ECB will also cut the key rate in March. However, the European Central Bank has much less room for activity than the US Fed. Thus, we believe that the ECB will not be able to stimulate the economy as well as the Fed. This means that the European economy will continue to slow down at a much faster pace than the American one. And all these factors play again in favor of the US dollar. In addition, the collapsed oil market cannot be considered the reason for the decline in the dollar and vice versa too, since the price of oil is denominated just in dollars. And accordingly, if the dollar becomes cheaper, then oil should rise in price. However, we see that the dollar and oil collapsed simultaneously with the US stock indices. All this speaks only of what we have been repeating for the last few days. Panic. And that's it.
Meanwhile, "storm" continues not only in the United States, but also the European Union. Firstly, it is in the European Union that there are much more people infected with the Chinese virus than in the United States. Secondly, the EU economy is already much weaker than the US and no less tied to the Chinese, which so far suffers the most. Thirdly, in the European Union, particularly in Italy, the entire regions are already in quarantine. At the same time, according to recent reports, the ECB is considering whether to reduce the key rate. If this information is true, then we have a number of questions. First, is the ECB even able to somehow influence the rapidly approaching crisis and recession? Secondly, if the ECB does not see any reason to reduce the key rate due to 10,000 infected people, then perhaps, the US did not need to soften its monetary policy immediately by 0.5%? As we said before so far, no negative effects on the US economy have been observed. Moreover, recent macroeconomic reports suggest that everything is in order. The economy continues to grow, the labor market is growing, and inflation is above 2%. Here's also a very interesting question: if the ECB still lowers the rate, will the euro collapse after this? Logically, this is exactly what should happen. But at the same time, traders are now ignoring absolutely all reports and events related to macroeconomics. Thus, such a decision by the ECB can be completely ignored.
Further, we have the oil market. On the one hand, the collapse in prices indicates a sharp decline in demand due to the fact that global business activity is declining, due to quarantine as well as fears of an even stronger spread of the virus. At the same time, the virus is not fatal in 80-90% of cases. That is, even with the current set of drugs, it is quite possible to do without serious losses. The main thing is to localize the epidemic itself and prevent its further spread. For example, much more people die from AIDS every year, there is no cure for this disease, just like vaccinations. However, because of it, quarantine is not declared, stock markets do not fall, and panic does not prevail in the markets. Moreover, AIDS in 100% of cases leads to death. And if we look in more detail at all the most common diseases that end fatally, it becomes clear that coronavirus is not the main problem of mankind. Sooner or later, a cure will be found, a vaccine will be opened, and everything will return to normal.
Meanwhile, industrial production began to revive in Germany. In February, the increase in monthly terms was 3%, and the decrease in annual terms was -1.3%. Both indicators were higher than forecasted values. However, who is now interested in statistics from Germany? There were no more important publications during the first trading day of the week. From a technical point of view, there are still no signs of the beginning of correction. Thus, at any moment, uncontrolled upward movement can continue. The MACD indicator may begin to discharge. As a result, traders are still encouraged to follow the trend or stay out of the market.
Recommendations for short positions:
For eurocurrency sales, we recommend waiting for quotes to fix below the critical line. This is the minimum condition for shorts with minimum volumes with the goal of a support level of 1.1090.
Recommendations for long positions:
Eurocurrency purchases with the goal of the resistance level of 1.1470 can be held until the MACD indicator turns down (with a parallel decrease in the price). A reversal down can occur at any time, so you should be as careful as possible with any positions.
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.
The material has been provided by InstaForex Company - www.instaforex.com