EUR/USD - 24H.
The EUR/USD currency pair resumed its downward movement this week and fell by 85 points in total. The illustration clearly shows that the price has adjusted by 76.4% Fibonacci from the last round of the upward movement and by about 30% from the entire upward trend, which began last March. Thus, in global terms, nothing terrible has happened and the US dollar can resume falling at any time. However, since there is still a downward trend, it is recommended to trade down. We remind you that any fundamental hypothesis must be supported by specific technical signals. If there are no such signals, then the hypothesis is wrong at this time. Moreover, for the US dollar, a lot depends on when the approved $ 2 trillion will flow into the economy. This money has already begun to be distributed between the beneficiaries and the US population, however, it is important to know when it will begin to be spent by Americans. Recall that according to research, during the pandemic, Americans have accumulated about 1.5 trillion dollars and about 500 billion more will be credited to them according to the "economic rescue plan". That $ 2 trillion is deferred demand. As soon as this money starts to be spent, inflation can jump up, and the dollar exchange rate - rush down. Also, do not forget that another 1.5 trillion will be sent to local authorities and businesses, and by the summer, the US authorities want to adopt another package of stimulus measures in the amount of 2-4 trillion dollars.
COT report.
During the last reporting week (March 16-22), the EUR/USD pair did not rise or fall. Even though the downward movement still resumed later, at that time there was a flat. And the new COT report, which just describes that period, recorded minimal changes in the mood of all groups of traders. For example, the most important "Non-commercial" group closed about 1,700 contracts for purchase and 953 contracts for sale during the reporting week. Thus, the net position for professional traders has not changed. Recall that the last few reports of COT signaled a serious weakening of the "bullish" mood among a group of non-profit traders. This is indicated by the green line of the first indicator. Its noticeable decline began in February and continues to this day, which coincides with the movement of the euro/dollar pair. And in general, we could even conclude that the upward trend is complete since its completion has been brewing since September last year when the green and red lines of the first indicator were as far away from each other as possible. But then the factor of a huge increase in the gap between the US and EU money supply played into the hands of the European currency. The same thing may happen in 2021, given the plans of the US authorities to inject another 6-7 trillion dollars into the economy. Thus, the technical picture and COT reports now speak in favor of continuing the decline in quotes, however, the "foundation" warns of a possible new fall in the US currency.
The macroeconomic backdrop was extremely weak this week. There were a huge number of speeches planned for this week from Jerome Powell, Janet Yellen, and Christine Lagarde, however, none of them gave traders any new and interesting information. All the functionaries spoke either in general phrases, repeating the information that has long been known to the markets, or did not touch on the topic of economics and monetary policy at all. Thus, despite the general decline in the European currency, we can not conclude that it was influenced by the "foundation" or "macroeconomics". Moreover, the environment showed perfectly well that most of the macroeconomic reports continue to be ignored by traders. On Wednesday morning, business activity indexes rose significantly in the European Union. And in the afternoon, it became known about weak orders for durable goods in the United States, however, the euro/dollar pair remained in one place throughout the day. The only report that traders still reacted to is the report on US GDP for the fourth quarter, which was published on Thursday and showed an increase of 4.3% y/y.
Trading plan for the week of March 29-April 2:
1) On the 24-hour timeframe, the downward trend persists, thus, it is recommended to consider buy orders not earlier than fixing the price above the critical Kijun-sen line. At the moment, the price has worked out the 76.4% Fibonacci level, however, there was no clear rebound, so we believe that the downward movement can continue to the next Fibonacci level of 38.2% (1.1690). On the lower timeframes, it is allowed to consider the upward trends earlier.
2) The downward trend persists at this time. However, there are a lot of factors that can now affect the exchange rate of the euro/dollar pair, and some of them speak in favor of a new fall in the US dollar. Thus, it is recommended to trade downwards now, using lower timeframes, because there is a clear trend. But it should be remembered that from a fundamental point of view, the probability of a new and strong fall in the US currency in 2021 remains high.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas are areas from which the price has repeatedly bounced before.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
