4-hour timeframe
Technical details:
Higher linear regression channel: direction - downward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -46.0891
For the EUR/USD pair, the first trading day of the week ended with a new round of corrective movement. Thus, the European currency began to show the first signs of completion of the downward trend and recovery. Unfortunately, it is too early to say that the downward trend is over. At any moment, the price drop may resume, as the situation on the world oil and stock markets remains very difficult. Thus, the euro currency was adjusted on Monday not because there were fundamental reasons for this, but because one currency can't go down forever. In other words, the reasons were purely technical. Thus, since the situation in the world with "coronavirus" has not changed at all, it is also not necessary to expect a change in the mood of market participants. Despite the fact that the last two days have passed without depreciation of the euro currency, volatility remains extremely high, which indicates the continuing panic mood of the markets.
Finally, today, March 24, the first macroeconomic reports for the month of March will begin to arrive. It was in March that the whole world seriously faced the problem of the COVID-2019 epidemic. Thus, it is in March that we expect a serious reduction in all indicators of the state of the economy of all the countries of the eurozone and America. And the main question, respectively, is how bad things are in the States and the EU? Until now, we could only judge this by the measures taken by the governments of these countries, as well as by the central banks. However, both banks and governments simultaneously decided to ease monetary policy as much as possible. The only thing to note is that the ECB did not lower rates since they are already "ultra-low". However, both the Alliance and the States have announced an expansion of quantitative stimulus programs and any financial support for the economy. However, all these actions do not allow us to assess the real losses of both economies. And today, business activity indices in the services and manufacturing sectors of the European Union, Germany, the UK, and the US will be published.
We discussed all these indices in detail in the articles - "Preview of the week". Now we remind traders that all the indices of all countries are preparing to seriously fall down. Although these are only preliminary values for March, no one doubts that if any indicator is, for example, 40.0, it is unlikely that this value will change to 50.0 before the end of the month. Thus, it is highly likely that the preliminary values will coincide with the forecast values. So, in Germany, the business activity index is expected to decline from 48.0 to 38.5-39.6. The index of business activity in the service sector - from 52.5 to 41.7-42.3. In the European Union, experts' forecasts predict a fall in the PMI in the manufacturing sector from 49.2 to 39.0-39.6, and for the service sector - from 52.6 to 37.5-39.0. Since all four of the EU's most significant indices are almost guaranteed to fall below the mark of 50, it doesn't really matter what the actual numbers are. In any case, there will be a decline in all sectors. Data will also be published in the United States where business activity in the manufacturing sector is likely to decrease from 50.7 to 42.0-42.8, and in the service sector - from 49.4 to 42.0-40.0. Thus, the picture is approximately equal. However! If business activity in the United States turns out to be significantly lower than the already very weak forecasts, then traders can finally pay attention to the statistics and stop buying the US dollar simply because they consider it the most stable and safe currency. After all, if you think about it, what are the reasons for the growth of the US dollar in the last two weeks? Especially given the huge drop in US stock indices? Especially given the number of dollars the Fed will have to print to keep the US economy afloat. After all, this is an elementary oversupply of dollars at almost zero rates and Donald Trump's passionate desire to devalue the national currency. We would say in the current conditions (which are already very different from those that were just a month ago), the US currency no longer has such rosy prospects. Moreover, at the moment, it looks frankly overbought, which means that sooner or later a reverse movement will follow.
As for the "coronavirus", the number of cases in the European Union is already approaching 200,000. The countries that are most susceptible to the epidemic are the same - Italy (64,000), Spain (33,000), Germany (29,000), France (17,000), Switzerland (9,000). There are about 370,000 cases of coronavirus worldwide, but we still believe that the real numbers are much higher. Many countries remain in quarantine and it is unlikely that it will end soon. Italy, of course, is the hardest hit. In the past two days, Italy has twice set a new record for deaths from the epidemic. Yesterday, 793 people were killed by the virus. In total - almost 5,000. More than 20% of the medical staff was infected with the "coronavirus". Unfortunately, according to the World Health Organization, the rate of increase in the spread of the virus is growing almost exponentially. If 67 days passed from the established first case to the level of 100,000 infected, then the second hundred thousand took only 11 days, and the third - 4 days. Of course, this may be due to the fact that many more people were infected with the virus in the first 67 days, they simply did not have a new disease diagnosed. However, more importantly, the virus continues to spread and it is not possible to stop its growth.
From a technical point of view, the indicator Heiken Ashi continues to paint the bars in the color purple. This way, the correction can continue. At the same time, the state of panic does not leave the markets, respectively, at any moment, the euro/dollar pair can rush in any direction with new forces.
The average volatility of the euro/dollar currency pair remains at record high values and continues to grow day by day. At the moment, the average value for the last 5 days is already 238 points. The growth rate is not as high as it used to be. Markets continue to be in an agitated state. In the last two days, we can say that there is a technical correction, so perhaps the period of baseless collapse is over. On Tuesday, we again expect a decrease in volatility and movement within the channel, limited by the levels of 1.0504 and 1.0980.
Nearest support levels:
S1 - 1.0742
S2 - 1.0620
S3 - 1.0498
Nearest resistance levels:
R1 - 1.0864
R2 - 1.0986
R3 - 1.1108
Trading recommendations:
The euro/dollar pair started to adjust. Thus, traders are still recommended to consider selling the euro currency with the targets of the Murray levels of 1.0620 and 1.0498, but after the reversal of the Heiken Ashi indicator down. It is recommended to buy the EUR/USD pair not before fixing the price above the moving average line with the first target of the Murray level of "2/8"-1.0986. When opening any positions, we recommend increased caution, since the market is still 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