The EUR/USD pair on Monday performed a smooth fall to the ascending trend line, which in the last two weeks has characterized the mood of traders as "bullish". However, this morning, the fall in the euro currency quotes continued, which made it possible to consolidate under the trend line. Thus, the mood of traders has changed to "bearish", and the fall can be continued in the direction of the level of 1.0926. Yesterday was remembered for two important speeches at once. The first is a speech by Christine Lagarde. Although the activity of traders was very low yesterday (that is, there was no reaction of traders to Lagarde's words), she still made several resonant statements. In particular, she said that stagflation does not threaten the European Union. Stagflation is a mixture of inflation and economic stagnation. And from my point of view, the fact that Lagarde herself started talking about stagflation suggests that the European Union is just moving in the direction of this very stagflation. Lagarde also said that the monetary policy of the ECB still does not depend on the monetary policy of the Fed.
The European economy is now much weaker than the American one, so the regulator cannot use the same tools like the Fed. In particular, for price stabilization. "Our economies are in different phases of the economic cycle and this was the case even before the war in Ukraine," the ECB president said. "Our economy is much more dependent on events in Ukraine than the American one," Lagarde added. I believe that these words should once again be interpreted as the ECB's refusal to tighten monetary policy in the next year or two. This is certainly bad news for the European currency, as rate hikes usually support the currency itself. But at the moment, we are talking about raising rates only in the United States. Moreover, Powell made it clear yesterday that, if necessary, the rate will increase at a higher rate. Thus, I believe that in the long term, it is the US dollar that is more attractive for purchases.
On the 4-hour chart, the pair performed a reversal in favor of the US currency and began a new process of falling in the direction of the corrective level of 200.0% (1.0865) after the formation of a bearish divergence at the CCI indicator. Fixing the pair's rate above the level of 1.1148 will increase the probability of further growth towards the next Fibo level of 127.2% (1.1404). The rebound of quotes from the level of 1.0865 will also work in favor of the EU currency.
Commitments of Traders (COT) Report:
Last reporting week, speculators closed 40,643 long and 593 short contracts. This means that the bullish mood of the major players has become much weaker. The total number of long contracts concentrated on their hands is now 202 thousand, and short contracts - 183 thousand. Thus, in general, the mood of the "Non-commercial" category of traders is still characterized as "bullish". This would give an excellent opportunity for the European currency to count on growth, if not for the information background, which is now supported only by the dollar. We are now witnessing a paradoxical situation: the bullish mood of major players has been maintained since January 25, but the currency itself is falling. And it falls quite heavily. Thus, geopolitics is now a priority.
News calendar for the US and the European Union:
EU - ECB President Christine Lagarde will deliver a speech (13:15 UTC).
On March 22, the calendars of economic events of the European Union and the United States contain one important entry for two. There will be another speech by Christine Lagarde today, but it is unlikely that her rhetoric will change compared to yesterday's speech. At best, the euro will ignore it, at worst, it will continue to fall.
EUR/USD forecast and recommendations to traders:
I recommended new sales of the pair with a target of 1.0926 on the hourly chart if a close is made under the trend line. Now, these deals can be kept open. I recommend buying a pair if there is a rebound from the 1.0865 level on a 4-hour chart with targets of 1.0926 and 1.1050.