EUR/USD – 1H.
On February 3, the EUR/USD pair generally continued the process of falling, but much weaker than a few days earlier. The pair's quotes failed to make a fall to the Fibo level of 161.8% (1.1997), and the graphical picture looks as if the dollar's growth will end in the coming days. Bear traders lose their desire and strength, so the level of 1.2000 can become an insurmountable barrier for the pair. Rebound from it will work in favor of the European currency and some growth in the direction of the levels of 1.2072 and 1.2131. Meanwhile, a political crisis is brewing in Italy. The government of the country (the parties, the coalition forces) could not make an unambiguous decision on how to allocate funds from the EU economic recovery fund. Against this background, several resignations followed, the "ruling majority" collapsed, a new coalition could not be formed, in general, the country is on the verge of re-electing the government.
Let me remind you that about 60% of the funds from the recovery fund will go to the countries most affected by the pandemic in the form of grants, that is, free of charge. It is not surprising why such passions are burning because of this money. Even the former ECB president Mario Draghi was offered to "help the cause", but everything goes to the fact that it is not Draghi who will help, but the elections. However, this is not the first time that Italy has been in crisis in recent years. When the pandemic began, it was Italy that was one of the most affected in epidemiological and economic terms. A few years ago, the country could not cope with the budget and public debt standards set by the EU. And all the while, there are rumors that Italy may become the next country to initiate an exit from the European Union. To do this, you just need to change the government.
EUR/USD – 4H.
On the 4-hour chart, the pair's quotes fell to the corrective level of 161.8% (1.2027). There was no rebound from this level, so the probability of a further fall in the direction of the corrective level of 127.2% (1.1729) is growing. However, I would now pay more attention to the hourly chart, where the graphical picture is more clear and understandable.
EUR/USD – Daily.
On the daily chart, the quotes of the EUR/USD pair performed a fall to the lower border of the upward trend corridor. A rebound from this line will work in favor of resuming growth in the direction of the corrective level of 423.6% (1.2496). Closing the pair under an upward trend corridor will increase the probability of a fall in the medium term.
EUR/USD – Weekly.
On the weekly chart, the EUR/USD pair has made a consolidation above the "narrowing triangle", which preserves the prospects for further growth of the pair in the long term.
Overview of fundamentals:
On February 3, the European Union released data on business activity in the services sector and inflation, and in the United States – the important ADP report and data on business activity in the services sector. However, the activity of traders yesterday was minimal, which allows us to conclude that the reports were not taken into account.
News calendar for the United States and the European Union:
US - number of initial and repeated applications for unemployment benefits (13:30 GMT).
On February 4, the calendars of economic events in the US and the EU are almost empty, the information background today will be extremely weak.
COT (Commitments of Traders) report:
Last Friday, another COT report was released, which was intended to help answer the question, what are the prospects for the euro currency? At the beginning of 2021 (in its first month), the quotes of the euro currency fell more than they grew. However, as 3 out of 4 COT reports show during this time, the "Non-commercial" category of traders is once again increasing the number of long contracts on their hands. This means that speculators continue to believe in the growth of the euro currency. During the last reporting week, major players opened more than 3 thousand long contracts and closed more than 1 thousand short contracts. Thus, their mood was again more "bullish" than a week earlier. Are we waiting for the new growth of the European currency?
Forecast for EUR/USD and recommendations for traders:
It is recommended to buy the euro currency with the targets of 1.2072 and 1.2131 on the hourly chart when the rebound from the level of 161.8% (1.1997). New sales of the pair are recommended when closing below the level of 1.1997 with a target of 1.1913 on the hourly chart.
Terms:
"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy foreign currency, not for speculative profit, but to support current activities or export-import operations.
"Non-reportable positions" - small traders who do not have a significant impact on the price.
