4-hour timeframe
Amplitude of the last 5 days (high-low): 52p - 26p - 43p - 80p - 64p.
Average volatility over the past 5 days: 54p (average).
The EUR/USD currency pair was adjusted against the correction on the second trading day of the week. Formally, we now have a signal to buy from the Ichimoku Golden Cross. However, the price is located inside the Ichimoku cloud, so the signal is weak. The bulls have very little strength even despite the fact that quotes of the euro/dollar pair fell for almost three full weeks. This suggests that the bears continue to own the initiative in the market and simply do not reduce previously opened dollar positions. Since it turns out that the demand for the US currency does not decrease, but the euro is not growing as well, the pair is moving up reluctantly. Of course, everything may change in the coming days, but at the moment we can say that the pair does not have enough strength to make a normal correction. Zero macroeconomic data and fundamental backgrounds provide great help in this. Not a single truly important report was published either in the US or in the European Union during the first two trading days of the week. The situation will not change for the better tomorrow. The German GDP report, which became known today, was of a secondary nature, since Germany, although it has a great influence on the entire economy of the eurozone, is still only one out of 27 countries. Moreover, the real value of GDP for the fourth quarter completely coincided with the forecast : +0.4% in annual terms and 0.0% in quarterly terms.
Thus, the economy of the EU locomotive is slowing down more and more and threatens to go into a frank recession in the coming year. Given this fact, as well as the fact that coronavirus affects the global economy, it is unlikely that in the near future we should expect an acceleration of the German or pan-European economy. Of course, the US economy is also unlikely to continue to accelerate, since it is closely linked to the Chinese one. And in China, there is now a decline in business activity, a drop in industrial production due to quarantine due to the virus in certain areas. Outbreaks of the epidemic have already been announced in other countries, for example, in Italy. Several areas have also been quarantined. All of this will continue to slow down the global economy, which has just recovered from a trade war between the United States and China. Based on the foregoing, it turns out that both American and European economies are very likely to slow down due to the coronavirus. The question is which economy will slow down faster. World media also note a serious drop in US stock indices, in particular the S&P 500 index. But even taking into account the fact that more than 900 billion capitalization has been lost, the US dollar has undergone sales coupled with the euro. It may have fallen in price with some other currencies, but hardly too much. Thus, even with the increased likelihood of lowering the key Fed rate, if the coronavirus cannot be overcome in the near future, the US currency would still be alright. What can I say, paired with the euro, it feels just fine, because it does not lose ground even after strong growth, and traders do not have enough strength to start a sensible correction. Thus, the general conclusion remains the same. Whatever happens in the world, it affects both the US and the EU. The alignment of forces between the two economies does not change. The alignment of forces between the monetary policies of the Fed and the ECB does not change. Thus, the US dollar still looks much stronger than the euro and will continue to strive for price parity with the euro in the long run.
We said earlier that in order for the euro to start to rise in price not within the framework of a simple correction (although this is not observed now), serious improvements in the EU economy or a strong weakening of the US economy are required. Neither one nor the other is now observed. Moreover, if Trump does start a trade war with the EU, as he intends, it will be another blow to Brussels. Moreover, the European economy is already experiencing problems due to a hole in the budget of 75 billion euros due to Great Britain's withdrawal from the bloc. This means that it will be necessary to cut down various programs, financing various projects, all this only weakens Europe. Thus, the situation does not even maintain equilibrium. Factors affecting the economy negatively are now much more in the EU than in the US.
From a technical point of view, the euro/dollar fell to the critical line and is now trying to resume the upward movement. And all this happens within the Ichimoku cloud. Thus, the upward prospects of the euro remain obscure.
Trading recommendations:
The EUR/USD pair continues a corrective movement. Thus, now it is formally possible to consider long positions with targets 1.0881 and 1.0905, but with extremely small lots or none at all. It will be possible to return to selling the pair with targets at support levels of 1.0795 and 1.0743, if traders manage to gain a foothold back below the critical line.
Explanation of the illustration:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator:
3 yellow lines.
MACD indicator:
Red line and bar graph with white bars in the indicators window.
Support / Resistance Classic Levels:
Red and gray dashed lines with price symbols.
Pivot Level:
Yellow solid line.
Volatility Support / Resistance Levels:
Gray dotted lines without price designations.
Possible price movements:
Red and green arrows.
