The EUR/USD currency pair on Tuesday refrained from a new fall. This is, of course, sarcasm, but what has been happening with the European currency in the last week is sad and terrible. It cannot be said that an upward correction has begun for the pair and now the worst is behind us because there is no correction as such now. Now, in principle, it is very difficult to predict the movement of the pair even for a couple of days ahead. The first shock has already passed, but, as we can see, traders continue to get rid of the most risky currencies. Or is it just that the demand for the dollar is so high that the demand for other currencies simply does not matter, it is still less. Whatever it was, the US currency continues to grow in general and has excellent prospects. We consider yesterday simply as a pause. What will happen next?
It largely depends not even on the escalation or de-escalation of the Ukrainian-Russian war, but on how traders and investors are now set up. Recall that the key reason for the growth of the dollar is the redistribution and redirection of capital around the world. We have already said that money is now leaving the Russian and Ukrainian economies. Naturally, they have to go into something with the help of some currency. It would be strange if investors brought Ukrainian hryvnia or Russian rubles to England or Spain. Naturally, these are dollars or euros. And to withdraw dollars, you need to buy dollars first, and therefore already withdraw them. What is the result? As a result: the longer the war between Ukraine and Russia lasts, the longer the riskiest currencies, assets, instruments, and markets can potentially fall. We are now witnessing absolute madness in the oil and gas market, for example. We see that the American stock market is falling. I don't even want to imagine what will happen today when the Moscow Stock Exchange opens after a long break. Therefore, the worst is not over yet.
American inflation: no intrigue.
As we have already said, there will be an extremely small number of important macroeconomic statistics and events this week. By and large, it will be possible to pay attention only to the report on American inflation and the ECB meeting. However, only the inflation report will be of interest, because no one is waiting for any action from the ECB right now. And what about inflation? In short, inflation is 90% likely to continue to rise in March and April. Recall that on March 15-16, the Fed is likely to decide to raise the key rate by 0.25%. But does anyone believe that this will stop inflation? In the UK, the rate has already been raised twice, and the consumer price index has been growing and growing.
Now both Europe and the United States are facing another serious problem, and they have created another one for themselves. First, energy prices are rising against the background of the Ukrainian-Russian crisis. This is already enough for prices to start rising again for everything because oil and gas are still used in production and logistics everywhere. Second, Europe and the United States have decided to abandon Russian gas and oil. Naturally, this will not happen in 5 minutes, and not all countries of the European Union have refused, but the point is that now almost no one buys oil and gas from Russia. Or they buy it, but at a huge discount, because demand has fallen, and oil production cannot just be stopped. Oil is either being extracted, or the well needs to be preserved until better times. Therefore, the prices that are now established on world markets have nothing to do with the prices at which the Russian Federation sells oil and gas. Consequently, in any case, there will be a shortage of carbohydrates on the market, which partly explains the increase in their price. In turn, this causes panic in the stock markets, since again, many companies are somehow connected with Russian oil and gas. And now they will have to be bought more expensive and not in Russia. And it is still the United States that has not imposed an embargo on oil imports from Russia. A corresponding decision may be made by Congress in the coming days.
The volatility of the euro/dollar currency pair as of March 9 is 111 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.0774 and 1.0996. The reversal of the Heiken Ashi indicator downwards signals the resumption of the downward movement.
Nearest support levels:
S1 – 1.0864
S2 – 1.0742
S3 – 1.0620
Nearest resistance levels:
R1 – 1.0986
R2 – 1.1108
R3 – 1.1230
Trading recommendations:
The EUR/USD pair has started to adjust. Thus, now we should consider new short positions with targets of 1.0774 and 1.0742 after the reversal of the Heiken Ashi indicator down. Long positions should be opened no earlier than the price-fixing above the moving average line with a target of 1.1108.
Explanations to the illustrations:
Linear regression channels - help to determine the current trend. If both are directed in the same direction, then the trend is strong now.
Moving average line (settings 20.0, smoothed) - determines the short-term trend and the direction in which to trade now.
Murray levels - target levels for movements and corrections.
Volatility levels (red lines) - the likely price channel in which the pair will spend the next day, based on current volatility indicators.
CCI indicator - its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.
