FX.co ★ Overview of the EUR/USD pair. March 4. Information chaos, macroeconomic confusion, fundamental lawlessness.

4-hour timeframe

Technical details:

Higher linear regression channel: direction - downward.

Lower linear regression channel: direction - upward.

Moving average (20; smoothed) - sideways.

CCI: -50.6922

The EUR/USD currency pair corrected to the moving average line during the past day and rebounded from it, indicating a desire to continue moving down. Thus, at the moment, the bearish mood among traders remains, and the US dollar may rise a little more in anticipation of the injection of an additional $ 2 trillion into the US economy. We have repeatedly stated that the factor of uncontrolled growth of the money supply in the United States is the most important at this time. At least, we can't find any other explanation for the fact that the US dollar has been falling for the past 11 months. Thus, if this factor takes place, then in 2021, the fall of the US currency is likely to continue. At the beginning of 2021 (in its first two months), we are seeing more of a corrective movement. At the same time, in the global plan, it is not too strong. So far, the euro/dollar pair has managed to correct by 400 points against an upward movement of 800 (if we take into account only its last round in November-December 2020). Thus, everything is ready to resume the upward trend. However, the bulls are currently in no hurry to open new long positions and generally rush into the maelstrom of trading with their heads. If you look at the 24-hour timeframe, you can see that trading in 2021 takes place mainly between the 20 and 22 levels. That is, if we take into account the trades in January and February, it is impossible to say with certainty about either an upward trend or a downward one. From our point of view, a technical correction against the upward trend was brewing. But it has already worked out the 50% mark on the Fibonacci. Thus, then you need to either continue the upward trend or go flat. And so far, it looks as if the markets have chosen the second option. So far, new trillions of dollars have not yet poured into the US economy, although they may do so in the coming weeks. Therefore, formally, there are no good reasons for the fall of the US currency yet. At the same time, the markets are now full of various kinds of macroeconomic and fundamental information, which often contradict each other. Thus, there is simply no consensus among traders right now. That's why the pair is tossed from side to side, especially in the last week. Let's briefly recall what were the main events in the last week? First, it was in the last week that everyone started talking about a sharp increase in government bond yields. At the same time, this applies to both Europe and the United States. The latest round of growth of the dollar is associated with this factor. Although the dollar grew for at most three full days, and the last round of growth in government bond yields began in early February. So the correlation is very weak. Secondly, at the end of last week, quite strong macroeconomic information was received from the United States, which coincided with the time of the release with the beginning of the strengthening of the US currency. Traders and analysts immediately cheered up, saying that the US dollar is growing thanks to these statistics. We would like to remind you that in the last year, the markets ignore about 90% of all statistics, so the probability that the strong growth of the dollar began since in the second estimate of US GDP for the fourth quarter increased from 4.0% to 4.1% is quite low. Third, the markets discussed the attack on the Syrian facilities of the US Air Force at the end of last week. Experts immediately linked this information to the growth of anti-risk sentiment and "explained" this strengthening of the US currency. We believe that all these factors together could indeed have caused the strengthening of the dollar, however, the impact of some of these factors has already been completed, and some – not at all the fact that it was. It should be recalled that any pair moves not only under the influence of fundamental factors. This judgment is especially relevant in 2021, when bitcoin began a new rally, when the shares of a particular company may rise or collapse due to the Reddit community, where users can agree on mass purchases or sales. When governments pour hundreds of billions and trillions of dollars into their economies, building up public debt but continuing to stimulate the economy, expectations look forward to a speedy recovery. Thus, there is no reason at all to say that the dollar grew based on the above factors. It should also be noted that even if the market reaction to a particular report took place, it could be scanty. For example, yesterday morning, when the report on business activity in the services sector of the European Union was released, the euro rose by 40 points, after which it began to fall within the day. 40 points is a meager movement even for the euro/dollar currency pair, and this report certainly did not have any impact on the overall mood of traders. Thus, if we take a long-term perspective, then now the main factor is still the stimulus package for the US economy from Joe Biden. Other macroeconomic reports or news have only a very short-term impact on the movement of the pair or do not have any effect at all. Based on this, you need to base your trading strategy for the next month or two, based on the factor of the new incentive package and the technical factor of the price rebound on the 24-hour timeframe from the 50% Fibonacci level. The growth factor in the yield of American Treasuries theoretically can support the dollar in the context of the next few months, but for this, the yield should continue to grow in the same period. Thus, as long as the yield increases, traders can expect a moderate growth of the dollar. This is what we are seeing in the first two months of 2021.

The volatility of the euro/dollar currency pair as of March 4 is 91 points and is characterized as "high". Thus, we expect the pair to move today between the levels of 1.1977 and 1.2159. A reversal of the Heiken Ashi indicator to the top may signal a new attempt to resume the upward movement.

Nearest support levels:

S1 – 1.2024

S2 – 1.1963

S3 – 1.1902

Nearest resistance levels:

R1 – 1.2085

R2 – 1.2146

R3 – 1.2207

Trading recommendations:

The EUR/USD pair is trying to continue its downward movement. Thus, today it is recommended to keep open short positions with targets of 1.2024 and 1.1977 until the Heiken Ashi indicator turns up. It is recommended to consider buy orders if the pair is fixed above the moving average with targets of 1.2146 and 1.2159.