The euro-dollar pair showed a corrective growth today, grabbing the ninth figure. And although EUR/USD bulls could not approach the key resistance level of 1.1000, they were able to move away from the base of the ninth price level, avoiding further decline to the area of the annual low of 1.0806.
The economic calendar is empty today, so market participants reacted primarily to events of a geopolitical nature. It cannot be said that the general tension in the markets has eased – the main hotbeds of tension are still pulsating, not allowing risky assets to come to the fore. And yet there are certain "glimpses", and traders are now quite acutely reacting to them. Even the minimum clearance of a fundamental nature is used by EUR/USD bulls in their favor. Today's price dynamics of the pair serves as a vivid confirmation of this. And yet, in my opinion, long positions for the pair still look extremely risky, especially ahead of tomorrow's reports from the ZEW Institute and (especially) ahead of the March Federal Reserve meeting. At the same time, geopolitical factors are known for their variability: during the day, the situation can turn 180 degrees.
Today's cautious optimism in the markets is primarily due to two factors. Firstly, Washington did not promote the Iranian topic in the context of yesterday's events in Iraq. Let me remind you that on Sunday morning in the Iraqi city of Erbil there were strong explosions near the US Consulate General. According to local authorities, this was due to the hit of ballistic missiles. In turn, representatives of the counter-terrorism unit said that it was an attack directly from the territory of neighboring Iran. Despite the explosive nature of the incident, the United States did not promote this topic in the context of voicing anti-Iranian theses. The US State Department has obliquely condemned the rocket attack, adding that American citizens were not injured during the attack. In fact, the situation has been brought to naught.
As for the events in Ukraine, there is also a reason for the weakening of anti-risk sentiment. The fact is that the fourth round of negotiations between representatives of Russia and Ukraine has started today. According to the Ukrainian side, following the results of today, the negotiators took a technical pause so that the participants of the subgroups worked out technical and legal issues. Earlier, representatives of both sides voiced theses about achieving "some progress".
Against the background of such an information flow, EUR/USD bulls were able to organize a counteroffensive, rising to the 1.0990 mark (the Tenkan-sen line on the daily chart). It should be noted here that in order to develop an upward movement, the bulls need not only to overcome the important resistance level of 1.1000, but also to gain a foothold in the area of the 10th figure. As a rule, when traders cross a key price line, they take profits without risking leaving positions open in dangerous territory. In this context, it is worth emphasizing that the price area above the 1.1000 mark is a kind of "minefield": it is here that bears can become more active against the background of mass profit-taking on long positions.
I repeat: market participants are now seizing on any more or less acceptable optimistic reason, trying to develop a correction. But for a large-scale correction, not to mention a trend reversal, reinforced concrete fundamental factors are needed. However, at the moment we are dealing, if not with an air castle, then certainly with a house of cards that can collapse at any moment.
Even if we ignore geopolitics, the other fundamental factors are also very unreliable in terms of supporting the corrective growth of EUR/USD. For example, reports from the ZEW Institute will be published tomorrow, which should reflect the pessimistic mood among representatives of the European business environment. For example, the German index of business sentiment in March should dive from 54 points to 5 points. According to some experts, the indicator will collapse into a negative area altogether – for the first time since March 2020, when the world felt the first consequences of the coronavirus crisis.
Also, do not forget that the results of the March Fed meeting will be announced on Wednesday, which may support the US currency. According to preliminary data, the Fed will raise the interest rate by 25 basis points. Some analysts do not exclude the option of a 50-point increase, although in my opinion, this scenario is unlikely. In any case, after the announcement of the results of the March meeting, the divergence of the positions of the Fed and the European Central Bank will increase again, exerting additional pressure on the euro.
All this suggests that long positions on the EUR/USD pair are still a priority, despite today's price pullback. It is advisable to use any upward spikes to enter short positions with the first target of 1.0900 (a psychologically important level) and the main target of 1.0810 (the lower line of the Bollinger Bands indicator on the D1 timeframe).