The EUR/USD currency pair continued to adjust on Monday. Although it is very difficult to call this movement a "correction". It was minimal. However, in any case, the pair's quotes rose to the Murray level of "4/8" - 1.1475, which is the previous local maximum, and bounced off it. In addition, the price went up 300 points without stopping, so there should be a correction in any case. Its target is the moving average line, which is now moving more towards the price itself than the price towards it. From a technical point of view, the pair's movements in the last month are not the best. After the price was flat for about a month and a half, the downward movement finally resumed. But it didn't last long. And it is this "not for long" that makes us wonder if the downward trend, which began at the very beginning of 2021, has not been completed in general? We have already drawn attention to the fact that the growth of the European currency last week was completely groundless. Rather, we should have expected a fall in the quotes of the euro currency, rather than its growth. The ECB did not make any important decisions, Christine Lagarde did not make any important statements, the GDP for the fourth quarter in the EU turned out to be very weak. And it is on this news that the euro is growing by 300 points without a single rollback. From our point of view, either the fall of the euro currency will resume in the near future to restore justice, or the downward trend of 2021 is over.
The euro currency has no reason to grow.
Attention to the European Central Bank is now, of course, much less than to the Fed or the Bank of England. This is because the European regulator itself has not given any signals about its readiness to tighten monetary policy. Therefore, what should traders pay attention to? Not for anything. Last week, the first meeting of the ECB in 2022 took place, which gave absolutely no new information. Despite this, the European currency gained about 160 points that day, which we consider a paradox. Meanwhile, inflation in the European Union is growing, and Christine Lagarde continues to assure that it will begin to slow down by itself this year. Maybe it's a game with markets? Recall that a few months ago, Fed Chairman Jerome Powell also stated that inflation "is about to start slowing down." After that, he had to admit that inflation got out of control and hastily curtailed the quantitative stimulus program and is preparing to raise the rate, simultaneously observing 7% inflation with the prospect of further growth. Maybe something similar is waiting for us in the EU?
However, Christine Lagarde has already publicly stated several times that the EU economy is too weak to refuse incentives and raise rates. She has also repeatedly stated that the ECB is not going to follow in the footsteps of the Fed. In general, there is a feeling that the ECB will not raise the rate, even if inflation rises to 7%, as in the United States. However, at a press conference after summing up the ECB meeting, Lagarde nevertheless noted that the regulator is ready to adjust its instruments to achieve long-term price stability and ensure inflation at the level of 2%. Maybe in this offer traders have found hints of a rate increase for themselves? But Lagarde clearly stated a little later that the European Union was facing an energy crisis that could not be predicted, and prices would begin to slow down in their growth when the price of energy resources stabilizes and problems with supply chains around the world begin to be resolved. Thus, Lagarde just made it clear that she was determined to wait. Wait for oil prices to stabilize, wait for supply chains to get better. Thus, the European currency now simply has no reasons and grounds for growth.
The volatility of the euro/dollar currency pair as of February 8 is 86 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.1344 and 1.1516. The reversal of the Heiken Ashi indicator downwards signals the beginning of a round of corrective movement.
Nearest support levels:
S1 – 1.1414
S2 – 1.1353
S3 – 1.1292
Nearest resistance levels:
R1 – 1.1475
R2 – 1.1536
R3 – 1.1597
Trading recommendations:
The EUR/USD pair continues to be located above the moving average line but is being adjusted. Thus, now we should expect the completion of the correction, after which we should look for an opportunity for new longs with targets of 1.1475 and 1.1516 after the reversal of the Heiken Ashi indicator upwards. Short positions should be opened no earlier than the price-fixing below the moving average line with targets of 1.1292 and 1.1230.
Explanations to the illustrations:
Linear regression channels - help 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 trading should be conducted 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.
