A new working week begins, and we need to figure out what to expect from it. If you look at the 24-hour timeframe, you can see that the euro/dollar pair has been trading very calmly in recent months, without sudden movements and "swings". In the second half of last year, there was a 4-month flat, but after that, the global upward trend resumed. Thus, the euro continues to trade in the most logical, reasonable, and convenient way. Convenient – for working out this pair. By contrast, the pound – which has been very difficult to work off in the last six months. But everything is fine with the euro currency. There is a trend, there are corrections commensurate with this trend, the general fundamental background can be the basis for the global strengthening of the euro currency and the fall of the dollar. Thus, it is the euro/dollar pair that remains the most convenient pair. However, at the same time, we continue to note that the markets are paying less attention to the macroeconomic background. Before the pandemic, almost any report could trigger a market reaction. Reports such as GDP or NonFarm Payrolls could cause a movement of 100-150 points, which is a lot for the euro/dollar. But with the arrival of the pandemic and the crisis caused by it, everything has changed in the truest sense of the word. Now a maximum of 10% of the total number of published statistics is processed. Moreover, sometimes the pair moves in the same direction as the reports published on this day tell it, so some analysts interpret this as a test of the released data by the markets. We remind you that the reaction to a particular published report occurs either immediately or with the opening of the next important trading session. For example, in Europe, GDP was published, which unexpectedly grew more than predicted. The Europeans can work out this news, but so can the Americans. Since the US trading session begins in the afternoon, two bursts in the foreign exchange market may follow on the same news. Thus, most of the macroeconomic statistics continue to be ignored by the markets, and the movement in the "right" direction is nothing more than a simple coincidence.
Nevertheless, it is not necessary to ignore the macroeconomic statistics. You just need to understand that there is no point in waiting for serious movements in the market because of it at this time. However, statistics show the condition of a particular economy at a given time. Simply put, it is now important for determining the overall state of any economy, assessing the pace of recovery after the global crisis. In our previous articles, we assumed that everything now depends on two global factors: "the balance of power of the American and European economies'' and "stimulus packages from governments and central banks". However, the first factor is slowly being pushed into the background, as recent reports have shown that the US economy is recovering faster, and its losses compared to the fourth quarter of a year ago are less than those of Europe. Simply put, at the moment, due to the pandemic, "lockdown" and the crisis, the US economy has lost less in percentage terms than the EU economy. This, from our point of view, is quite a strong factor in favor of the dollar continuing to grow. However, the movement that was observed at the beginning of this year fits the description of a "technical correction". Moreover, we have already said that in the 24-hour timeframe, two strong signals indicate the continuation of the upward movement. Thus, we believe that now, in the long term, the pair is simply correcting and in the coming weeks, the upward movement can be resumed. This resumption may coincide with the news that the US Congress has approved a new $ 1.9 trillion stimulus package. It doesn't even matter how this money will be received and poured into the economy. In any case, this is an increase in cash. This is a growth of the money supply available to economic entities and ordinary Americans. Thus, if this package is approved (and this can no longer be doubted), we expect a new fall in the US currency.
As for the statistics, there will be an extremely small number of them next week. In the European Union, the preliminary value of the consumer price index for February will be published. Recall that the previous report for January showed acceleration from -0.3% y/y to +0.9% y/y, which caused a huge number of questions about such a gigantic growth rate. So, it is very interesting, what will be the inflation data for February? No more important publications and events are planned for the next week in the European Union.
Trading recommendations for the EUR/USD pair:
The technical picture of the EUR/USD pair shows that the pair on the 24-hour timeframe bounced off important supports in the face of the Senkou Span B line and the 50.0% Fibonacci level. Thus, we still expect a new round of upward movement. And as long as the price is not fixed below the Senkou Span B line, this option will be the main one. On the 4-hour chart, it is now recommended to trade for an increase, however, the upward movement on this chart is not so unambiguous. The pair made another upward leap at the end of this week, however, it is impossible to say that there is a clear upward trend now. It may be better to trade the pair using the hourly timeframe at the beginning of the new week.
