4-hour timeframe

Technical details:

Higher linear regression channel: direction - sideways.

Lower linear regression channel: direction - upward.

Moving average (20; smoothed) - upward.

CCI: 40.5236

The EUR/USD currency pair has been trying its best to resume its upward movement recently. This is a long-term upward trend that has been going on for 11 months. Throughout January, the pair adjusted, and in February, attempts began to resume the movement to the north. We have repeatedly noted that, from a fundamental point of view, it is the further fall of the US currency that is most logical. We have already analyzed the reasons several times and stopped at the fact that everything now depends banally on the volume of the money supply in the United States and the European Union. In the United States, during 2020, due to various stimulus programs from the Fed and Congress, the money supply increased by about one and a half times (we are talking about the M0 aggregate-cash), and in the European Union – a maximum of 10%. It is with this factor that our conclusions about the depreciation of the US dollar over the past year are connected. However, logic has one drawback – it never stops in the middle. Thus, banal logic suggests that if the US Congress approves a new package of stimulus measures for $ 1.9 trillion, called the "Joe Biden economic rescue plan", then almost $ 2 trillion more will flow into the US economy, plus one that has not been spent since last year. In total, this is three trillion dollars. Thus, during 2021, the US dollar may fall in price by another 10-12 cents against the European currency. Now the euro/dollar pair is trading very calmly. The volatility is not the highest, however, it is not the lowest either. The most important thing is that the pair is slowly moving up, and in the coming weeks it may accelerate this movement. Already this Friday, the House of Representatives will vote for Joe Biden's proposal to save the economy and there is no doubt that it will be approved. Simply because the Democrats have a majority in the lower house of Congress. However, in the upper house or the Senate, there is an equality of forces - 50/50. Thus, there is no doubt that all 50 Democratic senators will vote "for" Biden's proposal, and all 50 Republican senators will vote "against". And such a circus can continue for the next two years until the parliamentary elections in 2022. The key vote for equality in the Senate will be that of Kamala Harris, the Vice President of the United States, who is also a Democrat. Thus, the Democrats in the Senate now have 51 votes out of 101, that is, the majority. However, this is in some way a reckoning for the Republicans for the activities of Donald Trump, whom they twice saved from impeachment, acting on the same principle of "we can, so we do". Consequently, the bill to help the US economy for 2 trillion is already almost a settled issue.

Meanwhile, on Tuesday and Wednesday, the head of the Federal Reserve, Jerome Powell, spoke twice in the US Congress before various committees (on financial services and banking) with a report on monetary policy. Recall that such performances take place twice a year and are usually purely formal. However, the reports themselves are quite detailed, so they arouse interest. There were a lot of theses voiced by Powell. We will look at the most important ones. For example, the head of the Federal Reserve urged "not to be afraid of hyperinflation due to the recovery from the pandemic and the crisis caused by it". Given the fact that in the last 12 years in the United States there has been low inflation (recall that most central banks set a goal of 2% inflation or higher), these words sound like a mockery. Given the fact that inflation to 2% could not be dispersed even with the help of the QE program, which began to operate in 2008, and even with all the cash injections into the economy in 2020, these words sound like a form of mockery. Powell also expects inflation to start rising in 2021, as he expects household and business spending to rise. This is likely due to the new stimulus package and the ongoing monthly repurchases of at least $ 120 billion in Federal Reserve Treasury bonds. Powell also noted that if inflation rises to "uncomfortable" values, the Fed has extensive tools to deal with this phenomenon. And at the same time: "according to the new approach, if inflation rises above 2%, we will allow it to remain at these levels for some time before tightening monetary policy." Thus, the Fed is waiting for inflation at 2% or slightly more (it has been waiting for a long time and may wait for a very long time). If inflation stabilizes in the region of 2%-2.5%, then monetary policy will remain "soft". If it grows above 2.5%, then monetary policy will be adjusted, taking into account the state of the labor market. Powell also said that the Fed's asset purchases will continue for "a long time" until the economy "shows a real recovery". The Fed chairman also expects that in 2021 the US economy will continue to recover. In his opinion, the forecasts are good for both the US and the world economy. And at the same time: "The economy is still very far from our employment and inflation targets." In general, Powell made it clear that the main thing for him and the Fed is the level of inflation and employment. It should also be noted that Powell was asked during his speech whether large-scale financial assistance from the government will be needed further if the recovery is faster than expected. Powell replied: "Monetary policy is accommodative, and it should remain so. We will move cautiously, patiently, and will give detailed warnings of our steps well in advance of any changes."

The volatility of the euro/dollar currency pair as of February 25 is 63 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.2079 and 1.2205. A reversal of the Heiken Ashi indicator to the top may signal the resumption of the upward movement.

Nearest support levels:

S1 – 1.2085

S2 – 1.2024

S3 – 1.1963

Nearest resistance levels:

R1 – 1.2146

R2 – 1.2207

R3 – 1.2268

Trading recommendations:

The EUR/USD pair has started a new round of corrective movement. Thus, today it is recommended to open new long positions with a target of 1.2205 in the event of a price rebound from the moving average line. It is recommended to consider sell orders if the pair is fixed below the moving average with targets of 1.2085 and 1.2079.