The EUR/USD currency pair fell 180 points on Friday. In principle, this is not even news anymore, since, in the last 7-8 trading days, the pair has been doing nothing but falling. It all started, as you might guess, on February 24, when the military conflict between Ukraine and Russia officially began. If this conflict did not exist, then, most likely, there would not have been such a powerful fall in the euro currency either. However, there is a conflict and it has been going on for 11 days. During this period, a lot of things have already happened, besides the war itself. Discouraging sanctions were imposed against the Russian Federation, which the world has not seen since Iran, which at one time found itself in complete isolation. The stock market of the Russian Federation together with the Russian ruble fell into the abyss. And this is although the Central Bank of the Russian Federation is doing everything possible to avoid a total collapse. In particular, it obliges exporters to sell 80% of their revenue in foreign currency and also conducts currency interventions. But the ruble still fell to its historic low of 120 rubles per dollar.
Most experts agree that these are only "flowers" for the Russian economy, and "berries" are still ahead. However, how do the war in Ukraine and the isolation of Russia affect the foreign exchange market? The most direct impact. Investors are fleeing from Russia and Ukraine in a panic, so the demand for the dollar is growing, because it is impossible to withdraw hryvnia or rubles to foreign bank accounts. It was impossible, and now it is impossible to withdraw anything at all and in any currency. "In any incomprehensible situation, buy a dollar" is the motto now not only of Russians and Ukrainians but also of almost any other nation. Simply put, the dollar is growing because it is a "safe-haven currency". Moreover, the way the shares of Russian companies have fallen both on the Moscow Stock Exchange (which has simply not been working in recent days, which makes it impossible for Russians to sell their shares) and on international stock markets indicates that money is being withdrawn, and they are being withdrawn again in dollars or another currency. In general, we believe that this trend of dollar growth will continue for the time being.
The strongest Nonfarm – and the euro is at the bottom.
On Friday, the most important report on Non-farms was published in the States, which reflects the number of new jobs created outside the agricultural sector. It is considered one of the most important indicators of the state of the American economy and even the unemployment report is of less importance. However, on Friday, the unemployment report turned out to be very strong, falling to 3.8%. As for NonFarm Payrolls, their number increased by 654 thousand, and the value of last month was revised upward. Thus, another rise in the dollar was almost inevitable. It should be noted that on Friday, the US currency began to grow at night. That is, with or without Nonfarm, the US currency would still rise in price once again. It's just that she's grown stronger with Nonfarm.
Thus, the overall picture of the situation in the foreign exchange market does not change at all. Risky currencies are falling in value, the dollar is rising. Theoretically, this situation can persist for as long as you want. So far, there is no question of any de-escalation of the conflict in Ukraine. The third round of negotiations between the Kyiv and Moscow delegations is due to take place today, but there has been little progress and, most likely, there will be little. These negotiations could last as long as the Brexit negotiations in 2020. This state of affairs is unlikely to suit either side. The longer the war lasts, the more losses on both sides. The greater the financial damage for each of the parties. And for the Russian Federation, it is now also a problem of almost complete isolation from the whole world. Of course, it is not a big loss for Russians that they will not be able to fly abroad now. Various statistics indicate that 70% of Russian residents do not even have a passport. However, we are talking about the isolation of the economy in the first place. Do you remember how Donald Trump opposed the "lockdown" because of COVID and how much the American economy lost in the first months of the pandemic? In Russia, everything will be much worse.
The volatility of the euro/dollar currency pair as of March 7 is 124 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.0801 and 1.1051. The upward reversal of the Heiken Ashi indicator signals a round of corrective movement.
Nearest support levels:
S1 – 1.0925
S2 – 1.0864
Nearest resistance levels:
R1 – 1.0986
R2 – 1.1047
R3 – 1.1108
Trading recommendations:
The EUR/USD pair continues its strong downward movement. Thus, it is now possible to stay in short positions with targets of 1.0864 and 1.0801 until the Heiken Ashi indicator turns up. Long positions should be opened no earlier than the price-fixing above the moving average line with targets of 1.1169 and 1.1230, which is not expected in the coming days.
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.