The EUR/USD currency pair bounced off the Murray "2/8" level - 1.1353 on Tuesday and adjusted to the moving average line. Thus, the US dollar has fallen in price, but this minimal drop in no way affects the overall technical picture. The balance of power between the euro and the dollar has not changed at all, so there is still no reason to expect a strong strengthening of the European currency. Of course, we are aware that this is a foreign exchange market. You can never be 100% sure of something here. However, perhaps now there is a situation that has not been for many years. Namely, the almost unambiguous advantage of the US currency on all fronts. To put it simply, all the fundamental factors are now on the side of the dollar. The Fed is going to raise the rate many times in 2022, and the ECB is not going at all. The Fed will completely abandon QE in March, and the ECB will invest money in the economy for most of the year. The Fed is going to start unloading its balance sheet in the summer, and the ECB does not plan such actions. The American economy is showing good growth rates, while the European economy is barely trudging above zero. In recent weeks, the topic of the Ukrainian-Russian conflict has also escalated, in which the countries of the European Union, the United States, and NATO are indirectly involved. And when the geopolitical situation worsens, the dollar is used by many investors as a "reserve asset". As a result, we have a situation in which all factors indicate that the dollar will become more expensive. Technical ones, too. On the 4-hour TF, the pair bounced off the 1.1475 level three times, showing its unwillingness to move higher. In the 24-hour TF twice failed to overcome the Ichimoku cloud. Thus, of course, it is still necessary to closely monitor the technical picture and trade in accordance with it, but the factors are now all in favor of the dollar.
World markets cheered up on the news about the withdrawal of Russian troops.
As we have already said, the key topic on the markets now is the Ukrainian-Russian conflict. It affects both the energy market, the cryptocurrency market, and the currency market. Yesterday, during the day, bitcoin was getting more expensive, oil was falling, stock markets were recovering, and the US currency was declining. Such a set almost unambiguously indicates that all participants in all markets follow only "geopolitics". In the morning, there was information that the units of the Southern and Western Military Districts are returning to their usual locations. It was this news that became a "relief" for the markets, which immediately felt that the situation was improving. However, after a few hours, it became clear that nothing was clear. First, no one knows what kind of units and divisions they are, where they have been recently, and from where they are going to their bases. Second, several international journalists have made statements that they do not observe any withdrawal of Russian troops from the border with Ukraine. Third, American publications have made a bunch of new statements that the Russian Federation may attack Ukraine in the coming days, that is, on February 16-17. Therefore, the relief was short-lived and now the markets are still in tension.
We have already said earlier that such a serious confrontation as Ukraine-Russia cannot remain unnoticed by the markets. Even if we assume that there will not be a full-scale war, any military action in Europe can greatly affect the economy of many countries. As well as the exchange rates of their currencies. If the war does start, it is unlikely that it will end quickly, as several experts write. One has only to recall the examples of Chechnya, Afghanistan, Iraq. The list, unfortunately, is endless and it shows that whatever the superiority of one enemy over the second, this does not mean that the war will end in a couple of days. And the longer the war goes on, the more losers there will be. And this, in turn, is beneficial to those countries that will not take part in this war. In general, the issue of the military conflict in Europe remains open and in the coming days, the entire information space will be occupied with this topic. Moreover, not a single leader of the countries participating in the negotiations has announced any progress.
The volatility of the euro/dollar currency pair as of February 16 is 85 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.1268 and 1.1438. The reversal of the Heiken Ashi indicator downwards signals a possible resumption of the downward movement.
Nearest support levels:
S1 – 1.1292
S2 – 1.1230
S3 – 1.1169
Nearest resistance levels:
R1 – 1.1353
R2 – 1.1414
R3 – 1.1475
Trading recommendations:
The EUR/USD pair continues to be located below the moving average line. Thus, now we should consider options for opening new short positions with targets of 1.1292 and 1.1268 in case of a rebound from the moving average. Long positions should be opened no earlier than fixing the price above the moving average with targets of 1.1414 and 1.1438.
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.
