On the 4-hour TF, the EUR/USD currency pair continued to decline on Friday. The aforementioned illustration amply demonstrates how the price has adapted to the moving average line, rebounded off of it, and then started going downward again. Therefore, there is no justification for anticipating the current development of the euro. In the last six to seven trading days, the pair has decreased significantly, but earlier it had become even stronger, so the correction should continue. We have often stated that we are anticipating a significant downward correction since the euro's growth over the past four to five months has not always been a good investment. As a result, the euro has grown less than fairly and is also overbought. We think that at this point, the market has already factored in all potential hikes in the ECB key rate, which means that the euro currency is losing one of its main drivers of growth. Regarding the currency and the Fed, this cannot be argued because conditions in America are well-positioned for the rate to stop increasing soon. Of course, the Fed may opt for one or two more unforeseen tightenings, but that would come as a surprise to the market and would help the US dollar. Such specifics from the European regulator have not yet been seen. The rate needs to be raised, according to European officials, but it's not clear how much higher it can go. If the market is unaware of a decision or change, it cannot be made to alter the pair's direction.
The ECB must therefore use new, forceful language to signal its willingness to tighten monetary policy by more than 0.75% at its next two meetings to support the euro. If such indications start to emerge, the euro may start to grow again, but we firmly doubt that the ECB is prepared to raise interest rates to extremely high levels. In a "neutral" scenario, the EU economy can avoid entering a recession, but in a "hard" one, it will undoubtedly experience one for one to three years.
The speech by Christine Lagarde and the GDP report.
There is no doubt that this coming week will be more fascinating than the one before. There will be more stories and incidents, and in some cases, they might affect traders' attitudes. The impending EU reports are not the kind of information that can fundamentally alter the existing situation, as we have already stated that "technology" may be at the forefront for market participants in the near future. Let's begin to solve it. The second assessment of the EU's GDP for the fourth quarter will be revealed on Tuesday. Since this is the second estimate and traders already know the general value, there is no need to anticipate anything from this report. However, the data might once more demonstrate a decline in economic growth to negligible levels. The European economy is still perilously close to entering a recession. The release of industrial production on Wednesday is not a significant event given the current situation. On Wednesday, Christine Lagarde will give a speech that may be very fascinating.
Lagarde must provide specifics; we don't want generalizations. The market will be able to modify its trading strategy if the specifics start to appear. Knowing whether the ECB will increase the rate by more than 0.75% in its next two sessions is now crucial. In that case, the euro might resume its growth. The euro will soon lose its competitive edge over the dollar if such rhetoric is not spoken. This week's speakers will also include Philip Lane, chief economist, and vice president Luis de Guindos. They can also be useful in understanding what the ECB will be like in 2023. Of course, not every office will inform the market of something intriguing that occurs frequently. As a result, any European-related developments may or may not have a significant impact on how the pair moves. This week, we urge traders to build on technical indicators and indications. Additionally, we have particular signals indicating the continuation of the negative movement on the 4-hour and 24-hour TF.
As of February 13, the euro/dollar currency pair's average volatility over the previous five trading days was 77 points, which is considered to be "normal." So, on Monday, we anticipate the pair to move between 1.0599 and 1.0753 levels. A new round of upward correction will be signaled by the Heiken Ashi indicator turning back to the top.
Nearest levels of support
S1 – 1.0620
S2 – 1.0498
S3 – 1.0376
Nearest levels of resistance
R1 – 1.0742
R2 – 1.0864
R3 – 1.0986
Trading Advice:
The EUR/USD pair started moving down again. Until the Heiken Ashi indicator turns up, you can continue holding new short positions with targets of 1.0620 and 1.0599. After the price is fixed back above the moving average line, long positions can be initiated with a target of 1.0864.
Explanations for the illustrations:
Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.