4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - downward.
CCI: -181.0696
On March 18, the euro/dollar pair continued to be in a downward movement. On the currency market, there was another collapse of quotes, which lasted all day and affected the euro and the British currency. Unfortunately, not only the European currencies collapsed once again (the Swiss franc also does not lag behind its "counterparts" in misfortune), but also oil of all brands, as well as American stock indices. Thus, we make an almost unambiguous conclusion: full-scale panic in the markets persists. This can be seen from the volatility indicators. Three of the last five trading days ended with a value of more than 200 points per day. It is worth recalling that the normal volatility value for the euro currency is 40-60 points per day. The high is 80 points per day. More than 100-120 points of the pair are held on major holidays. Thus, the continuing spread of "coronavirus", especially the European Union, which came out on top in the world in terms of the number of people infected with the epidemic, overtaking China, continues to have a devastating impact on the economies of all countries and world as a whole. Unfortunately, this state in the markets may continue for a very long time, until the epidemic is localized, until the pace of new infections is suspended, until a remedy for the "Chinese virus" is found. Of course, stock markets will not be able to fall to zero, but the cuts may be so severe that it will take years to reach the levels of 2019. Unfortunately, most likely, it will not do without a series of bankruptcies. Already, experts are sounding the alarm about airlines, various companies and firms associated with the tourism sector, which has already declined by more than 50% around the world. The banking system of each individual country and the entire world may also experience problems with liquidity. In general, the case is that the world will plunge into a new large-scale crisis. As usual, the most "get" ordinary citizens. Separately, we should say about "black gold", which continues to become cheaper, but even theoretically can not fall for a long time below the cost price mark. The "oil wars" that have started now in the world because OPEC and Russia failed to agree on a new agreement to stabilize oil prices – this is exactly what is needed during the global pandemic.
We haven't talked about this in previous articles, however, the European Union even published enough important macroeconomic statistics yesterday. However, it had no effect on the movement of the EUR/USD currency pair. It is impossible to imagine that the euro collapsed by another 200 points only "thanks" to the report on inflation in the European Union for February, and even then, which completely coincided with the forecast values of experts. The consumer price index slowed to 1.2% year-on-year and +0.2% month-on-month. The basic consumer price index (which does not take into account changes in food and energy prices) also amounted to 1.2% y/y and in monthly terms +0.4%.
The United States also published some of the stats that are not the most important and significant. The number of home construction projects started in February was 1.599 million, and the number of new permits received was 1.464 million. The change in the number of new construction permits received was -5.5%.
Meanwhile, the European Central Bank, represented by its Vice-Chairman, Luis de Guindos, tried to calm the markets, saying that it had not completely exhausted the available tools for influencing the economy. Almost all market participants spent the past week discussing the actions of the Fed and the ECB, which brought their rates to "0% or lower", and also announced the resumption/expansion of quantitative stimulus programs. Thus, according to many experts, both central banks have exhausted all available ways to influence the economy. The coronavirus crisis is getting worse and both economies continue to demand even more stimulus measures. Also, an exciting statement was made by the head of the Austrian Central Bank, Robert Holzman, who said that the ECB's monetary policy is at the limit of its capabilities, and the Central Bank itself will not be able to meet market expectations. However, a little later, Holzman refuted his own words, saying that monetary policy has not yet reached its limits. On March 18, the European Central Bank announced that it is ready to further adjust the parameters of monetary policy if it is necessary to maintain the liquidity of the banking system and support the European economy. The probability of a recession has increased significantly, according to Luis de Guindos, but the regulator is ready to "act".
On Thursday, March 19, neither the US nor the European Union is scheduled for any important macroeconomic publication. But as we have said many times, there is no point in statistics now anyway. We need to wait for important reports on the state of the US and European economies in March. It is these data that can either inspire a certain optimism in the hearts of traders and investors or even more plunge them into shock. So far, data for January and February continue to be published, when everything was relatively good and stable both overseas and in Europe. However, tomorrow there will still be one report that can already show how much the "coronavirus" epidemic has affected the US economy. The index of business activity in the manufacturing sector of the Federal Reserve of Philadelphia may fall from 36.7 to 10. At least, these are the official forecasts. In practice, the reduction can be much more extensive. Also, tomorrow, the results of the meeting of the National Bank of Switzerland will be published, which has long brought its key rate to the value of -0.75% and is unlikely to increase its value in March.
According to the latest data, the number of people infected with coronavirus in the world is more than 207,000. In Italy, the number of cases rose to 32,000, in Spain - 14,000, in Germany - 11,500, and in France - 8,000. This week, animal testing of the coronavirus vaccine will officially begin in Italy. In total, more than 7,000 people died from the pandemic in Italy.
From a technical point of view, the EUR/USD pair continues to fall heavily and there is still no sign of the beginning of an upward correction. The Heiken Ashi indicator is still directed downward, as is the moving average line, as well as the senior channel of linear regression. The pair fell to the Murray level of "1/8"-1.0864 and the volatility level of 1.0819. A rebound from these levels may trigger a round of corrective movement. Theoretically.
The average volatility of the euro/dollar currency pair remains at record values and continues to grow. At the moment, the average value for the last 5 days is 215 points. Markets continue to be in an agitated state. There is no logic in the movement now, the markets just collapse and collapse every day. Thus, on Thursday, we again expect a decrease in volatility and movement within the channel, limited by the levels of 1.0675 and 1.1105.
Nearest support levels:
S1 - 1.0864
S2 - 1.0742
S3 - 1.0620
Nearest resistance levels:
R1 - 1.0986
R2 - 1.1108
R3 - 1.1230
Trading recommendations:
The euro/dollar pair resumed its downward movement. Thus, traders are recommended to continue selling the euro currency with the targets of 1.0742 and 1.0675 until the Heiken Ashi indicator turns upward, which will indicate a round of upward correction. You will not be able to buy the pair until the price reverses above the moving average line with the first target of 1.1230. When opening any positions, we recommend increased caution, since the market is now in a state of outright panic.
Explanation of the illustrations:
The highest linear regression channel is the blue unidirectional lines.
The lowest linear regression channel is the purple unidirectional lines.
CCI - blue line in the indicator window.
Moving average (20; smoothed) - blue line on the price chart.
Murray levels - multi-colored horizontal stripes.
Heiken Ashi is an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com