4-hour timeframe
Amplitude of the last 5 days (high-low): 67p - 60p - 54p - 127p - 102p.
Average volatility over the past 5 days: 82p (average).
The first trading day of March and the new week ends surprisingly with the continuation of the strengthening of the European currency, although most of the traders were waiting for a correction today. However, we warned that you should not catch a correction, it is better to respond to the readings of technical indicators, which at the very beginning of the Asian trading session turned up again (we are talking about the MACD indicator). Thus, despite the fact that there were not a large number of macroeconomic events today, traders continued to buy euros almost from the very moment trade had opened. What does this mean? This suggests that market participants continue to ignore macroeconomic data and continue to panic by getting rid of the US currency, and only in pairs with the euro and the franc. The pound was prone to fall against the dollar during the day. Thus, the current movement, which began as a banal technical correction, now looks like a strong upward trend. And most importantly, it's hard enough to say what the trend is based on, besides over panic. Yes, the US stock market suffered serious losses last week. Yes, coronavirus is spreading, including in the United States, where the first death has already been recorded. Yes, the Fed almost openly stated that it was ready to lower its key rate at the March 18 meeting. But why doesn't the pound sterling rise in price? After all, no important and disappointing information has been received in the UK in recent days. Traders cannot be upset by the negotiations with the European Union, since they have not yet begun, and no information has been received on this subject. In general, a paradox. We are no longer talking about the fact that coronavirus will first of all hit the already weak European economy. Many countries in the eurozone are already balancing on the brink of recession, showing low GDP growth. The Chinese virus could finally drive the EU economy into recession. It is the EU economy, not the American one.
However, traders, as we have said, are openly panicking. Nothing else can explain the euro's strongest growth by 120 points on Monday. But the day has not even ended. The average daily volatility of the pair has been no more than 50 points in the past few months... Indirectly, the macroeconomic reports of the day influenced the euro's growth today. However, we believe that they were frankly contradictory and could not, with all the desire, cause such a strong movement. Two key business activity indexes in the manufacturing sectors of Germany and the entire European Union were higher than forecasted and amounted to 48.0 and 49.2, respectively. However, despite this increase, both indicators remained in the so-called red zone. That is, business activity in the locomotive country of the entire EU and the EU itself remains at a low level to talk about the restoration of industrial sectors. Thus, European data were not unambiguous. But US business activity indices were no less ambiguous. According to Markit, in the US manufacturing sector, business activity fell from 50.8 to 50.7 in February. According to ISM, from 50.9 to 50.1. Thus, both indices showed a reduction and both remained in the green zone, which indicates the growth of the industrial sector. Even more conflicting data. Thus, although formally in the EU statistics turned out to be higher than forecasts, and in the US - lower, we do not think that traders even paid any attention to it at all today.
The most interesting event of the day is the speech of the ECB Vice President Luis de Guindos, who is almost as straightforward as Jerome Powell last Friday, said that the regulator is ready to take all necessary measures and adjust all monetary instruments to ensure a steady inflation rate of its target level. Thus, in a veiled way, de Guindos completed a series of speeches by the heads of the largest central banks in the world, confirming the traders' concerns about easing monetary policies of the EU and the US. However! Traders ignored this information, although, in essence, it means that the ECB will also lower the rate, as well as the Fed. Only the Fed will mitigate monetary policy from the current 1.75%, and the ECB from -0.5%. This is the whole difference, but the euro is still continuing to rise in price. Therefore, we recommend that traders, as before, follow the trend, and at the same time, be aware of all the groundlessness of the current strengthening of the euro. Consequently, be prepared for a new sharp reversal of the price down and a strong fall in the euro. Moreover, the upward movement is now almost vertical.
From a technical point of view, the pair continues its steady upward movement and overcomes the first resistance level for this week, at 1.1118, as well as the upper limit of the volatility channel on March 2. There are no signs of correction at the moment, and the MACD indicator may begin to discharge at any time.
Trading recommendations:
The EUR/USD pair is still upward movement. Thus, now it is possible to stay in long positions with the target at the resistance level of 1.1209, until the MACD indicator turns down while prices are decreasing in parallel. It will be possible to sell the pair with the target of 1.0870, when traders will be able to gain a foothold back below the critical line.
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