4-hour time frame
Technical data:
Bigger channel of the linear regression: direction is upwards.
Smaller channel of the linear regression: direction is downwards.
Moving Average (20) – downwards.
CCI: -208.9275
On Tuesday, February 2, the euro/dollar pair resumed falling and broke the level of 1.2060. Thus, the US dollar is rising amid a calmer market situation.
From the technical point of view, the pair continues losing in value after a failure to start a new uptrend. There are several reasons among fundamental and macroeconomic data. However, the technical analysis showed that the greenback has all chances to go on growing in the next few weeks. The US dollar showed two periods of falling, during the last 10 months and during the last 3 months. However, the upward correction occurred in neither cases. In relation to the 10-month growth of the pair, the correction is now less than 23.6%. It means that there was no correction at all. In relation to the second period, the correction is slightly above 38.2%. Thus, from the technical point of view, the correction could stop between the levels of 1.1900 and 1.1980 these are the 50.0% and 38.2% Fibonacci levels. At the same time, the US dollar will gain in value for some time. However, according to the fundamental data, the greenback has all chances to rise until the US Congress settles all the disagreements concerning the size of the stimulus package proposed by Joe Biden. The newly elected President proposed to pour another $1.9 trillion into the US economy. However, Republicans suppose that $600 billion will be enough.
Thus, the difference is $1.3 trillion that is 2/3 of the US rescue plan. It is still unknown how much time the parties may need to settle the issue. Some analysts suppose that it may take from one to three months. During this period, the US dollar may soar, if there are no other troubles. The greenback is expected to be quite stable until another $2 trillion appeared in US markets. President Joe Biden has already held a meeting with Republicans, discussing the new stimulus measures. However, the meeting led to nothing due to serious disagreements. Nevertheless, all the participants considered the meeting to be fruitful despite the fact that they did not reach a consensus. The Republican Party intends to cut the payments to $1,000 from $1,400. It wants to allocate funds only to those citizens and businesses that really need help, and not to everyone. In general, negotiations are likely to be very long.
At the same time, former US President Donald Trump is likely to avoid a second impeachment. According to some Republican senators, they consider the impeachment of the president, who has already left office, "an unconstitutional decision." Only five or six from the 50 Republican senators are rumored to be ready to support the idea of impeachment. Notably, to remove the already departed president, there should be at least 17 Republican votes in the Senate. Moreover, all 50 Democratic senators should also give a positive answer. The Senate hearings on the impeachment case will begin on February 8. The only charge is incitement to sedition and insurrection. However, now, many senators say that the process will be completed very quickly and will not bring any result to Democrats.
In the European Union, the coronavirus pandemic remains the burning issue. We have already mentioned that the AstraZeneca company failed to comply with its obligations concerning the vaccine supply. This caused a conflict between the UK and the EU. However, the parties managed to solve the problem really quickly. According to the latest information, AstraZeneca delivered nine million more doses of its COVID-19 vaccine to the European Union in the first quarter of this year. "The company would expand its manufacturing capacity in Europe," Ursula Von der Leyen, president of the European Commission, said. She also supposes that the world will need much more doses of the vaccine due to new strains of the coronavirus. She hopes that 70% of the adult population in the EU will receive their dose of the vaccine by summer. As there are no geopolitical, epidemiological, and economic tensions, the US dollar may continue gaining in value. Technical factors also prove this. We cannot say for sure that there is a relation between the US dollar consolidation and quite a calm overall situation in the world. However, since the beginning of this year, the US has been showing a positive dynamic. The only question is whether it is a correction that could be followed by an uptrend or it is a new downtrend. Traders should also take into account that the new stimulus package is likely to weigh on the US dollar in the mid-term perspective and support it in the long term. The fact is that with the aid package, the US economy will recover faster. Moreover, it will be easier to catch up with the European economic recovery. Thus, from our point of view, the two main fundamental factors are the new stimulus package and the state of the US and the EU economies. Notably, the economic condition of both countries depends on stimulus measures.
On February 3, volatility of the euro/dollar pair totaled 78 pips. We can say that it is an average volatility level of the pair. That is why today, the pair is likely to hover between the levels of 1.1941 and 1.2097.
Nearest support levels:
S1 – 1.2024
S2 – 1.1963
S3 – 1.1902
Nearest resistance levels:
R1 – 1.2085
R2 – 1.2146
R3 – 1.2207
Trading recommendations:
The euro/dollar pair continues dropping. Thus, today, it is better to open short positions with the target of 1.1963 and 1.1941. Buy positions could be opened if the pair consolidates above the Moving Average with the targets at 1.2146 and 1.12207.
