The EUR/USD currency pair failed to show almost anything during the first trading day of the week. In the first half of the day, volatility was at zero, in the second - a little better. However, the technical picture from these movements has not suffered at all and has not changed at all. In principle, everything remains the same as it was this weekend. The pair twice worked out the level of Murray "3/8" - 1.1108 and both times failed to overcome it confidently. That is why we believe that the upward movement, which is an upward correction against a downward trend, has already ended or will end in the near future. Therefore, it will not be something unexpected for us to consolidate below the moving average and resume the fall of the European currency. The situation in the markets on Monday did not change too much either. Oil is rising in price again, gas has taken a short pause, but at the same time, it is also trading very expensive. Bitcoin is stuck in a side channel, the US stock market is actively recovering, the Russian ruble has stabilized a little, thanks to the actions of the Central Bank of the Russian Federation.
However, according to the absolute majority of experts, what we observed on the markets in late February and early March is only the first "wave" of panic. It's no secret that the West and the European Union will continue to put pressure on Moscow because it invades Ukraine. Consequently, neither the real nor the sanctions war is not that it has not been completed, they are in full swing. This means that there will be new sanctions, new restrictions, new departures of international companies from the Russian market. All this will lead to a new redistribution and redirection of capital around the world. As for the euro and the pound, as risky currencies, they are likely to continue their decline against the dollar in the medium term.
The European Parliament will discuss the fifth package of sanctions against the Russian Federation for a whole week.
On Monday, the macroeconomic and fundamental backgrounds could be said to be absent. Early in the morning, Christine Lagarde made a speech in the EU, who said that stagflation does not threaten the European Union. Lagarde previously stated that inflation will start to reach 2% in the medium term. We will not comment on Lagarde's words, we will only say that so far everything looks exactly the opposite. Inflation in the EU is high, GDP growth rates are low, and no one knows what a "medium-term perspective" is, except Lagarde.
But the European Union continues to rigidly bend the line towards Russia. This week, European deputies and foreign ministers of all the countries of the Alliance will discuss the fifth package of sanctions, which will include new restrictions for both individuals and organizations, banks. However, the key point may be the oil embargo. From our point of view, this is not the last possible restrictive step that the European Union can take. It's no secret that Russian oil can at least be replaced with oil from the Middle East or America. But if the EU imposes a gas embargo, it will be everything. In the sense that after that, the European Union will no longer be able to exert any pressure on the Russian Federation. Another question is how much will the Russian economy withstand such sanctions?
Already, many Russian and international experts say that default in Russia is a matter of time. Many even name specific dates - for example, April 15. If Moscow loses a significant part of foreign exchange earnings for oil and gas, it will be another powerful blow to its economy. There are already huge problems with the currency in Russia, and the Moscow Stock Exchange has been closed since February 25. By doing this, the European Union seeks to reduce dependence on the Russian Federation in the oil and gas industry. Earlier, the EU countries stated that they were not ready to break all contracts for the supply of hydrocarbons from the Russian Federation overnight, but by 2030 they could completely transfer their economies to alternative energy sources. Thus, if an oil embargo is imposed, the European Union itself will also suffer, and oil prices will soar into space. However, it is not for us to judge what decisions are made at the highest level in the EU or Russia. Each side has its geopolitical interests, and we can only watch what is happening, being in a quiet shock.
The volatility of the euro/dollar currency pair as of March 22 is 99 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.0922 and 1.1120. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward movement.
Nearest support levels:
S1 – 1.0986
S2 – 1.0864
S3 – 1.0742
Nearest resistance levels:
R1 – 1.1108
R2 – 1.1230
R3 – 1.1353
Trading recommendations:
The EUR/USD pair continues to be located above the moving average. Thus, now we should consider new long positions with targets of 1.1108 and 1.1120 in case of a rebound from the moving average line. Short positions should be opened no earlier than the price-fixing below the moving average line with targets of 1.0922 and 1.0864.
Explanations to the illustrations:
Linear regression channels - help to 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.