FX.co ★ EUR/USD analysis and forecast on March 4, 2021

New COVID-19 strains appear one after another

To start my review of the main currency pair on Forex, I would like to talk first about COVID-19 which is still high on the agenda. Many countries worldwide have put their efforts into the mass vaccination program in order to develop collective immunity to the virus. However, new strains of the coronavirus infection appear one after another. So, after the so-called "British" and other varieties of strains, a new "Nigerian" strain has appeared. In this regard, some experts have expressed concern about the effectiveness of the vaccine against new COVID-19 mutations (strains). Experts from Russia are sure that the local vaccine Sputnik V, which has passed all clinical trials and is recognized by the world community, is able to cope with any virus strains known today. Meanwhile, in a number of European countries, the lockdown measures are being extended or tightened. Thus, in Germany, the lockdown has been extended until March 28.

Now, let's talk about the market sentiment that dominated yesterday's trading. Apparently, investors hope for a faster recovery of the US economy from the coronavirus crisis. This is quite logical, given the disruption to the vaccination program in Europe. However, yesterday's data on employment from ADP fell short of the market's expectations. The actual number of new jobs was below the projection of 125,000 and amounted to 117,000. However, official releases do not always reflect the changes in the number of people employed in the private sector of the US economy. Therefore, we will evaluate the pace of recovery of the world's largest economy on Friday when the US Labor Department presents the data on unemployment and Nonfarm Payrolls. Today, I recommend paying attention to initial jobless claims and manufacturing orders. Later in the day, Fed's Chair Jerome Powell will give a speech. Meanwhile, the EU will release the data on unemployment rate and retail sales at 10:00 GMT. I admit that today's macroeconomic events may affect the trajectory of the EUR/USD pair. However, the main changes are expected on Friday when the US jobs report is published.

Daily chart

In the meantime, the euro/dollar pair remains under downward pressure. However, there have been no significant changes from the technical point of view. Most likely, market participants are waiting for the jobs report from the US that is due to be released tomorrow. This data will help determine the further direction of the pair for the current week. In my opinion, there are still more technical conditions for a downtrend in EUR/USD which suggests selling the pair. On the other hand, it is hard to predict the reaction of the markets to the US labor statistics. This is how the picture looks like on the daily chart: bulls need to return the price above 1.2100 while entering the Ichimoku Cloud. In turn, bears need to break through the 89 black exponential moving average and consolidate below the psychological level of 1.2000. Then, they should attempt to break through the strong support level at 1.1952.

H1

On the hourly chart, we can clearly see that the euro/dollar pair is trading below the three moving averages: 50 MA, 89 EMA, and 200 EMA. I believe that any of the above moving averages, as well as the level of 1.2100, can act as strong resistance from where that price may turn to the downside. This is what actually happened at the time of writing. The 50 MA served as strong resistance for the price and restricted its upward movement. After that, the price reversed to retest yesterday's low at 1.2042.

Trading tips for EUR/USD:

Given the current technical situation, it is possible to open both long and short positions. In my opinion, short positions are more preferable. It is better to open sell deals after the candlestick generates a sell signal in the resistance area of 1.2060-1.2110. More levels to sell from: 1.2062, 1.2073, 1.2092, and 1.2104. You can consider opening long deals in case a reversal candlestick pattern is formed near the marks of 1.2010, 1.2000, 1.1980, and 1.1960.

Good luck!