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Hello, dear colleagues!
And again, we have to start today's article with the topic COVID-19. This is a reality, and, unfortunately, a very sad one.
I believe it is no secret that the global economy and the global financial system are facing a crisis that may become more severe than in 2008. For example, in the United States of America, GDP may decline by 2% this year, and the budget deficit risks reaching 15% of gross domestic product.
The cause of the outbreak is a new type of coronavirus, where the United States is confidently leading in the number of infected, and the country's economy is already suffering huge losses. Against this backdrop, the US Federal Reserve (FRS) is likely to leave interest rates near zero during this and next year.
However, a slight decrease in the number of infected people in New York, as well as an optimistic statement by US President Donald Trump about some stabilization of the situation, caused a slight optimism on global financial markets. But how long will it last? I think it will not be for long, and this is just a reason for some adjustments.
Meanwhile, the situation in Europe continues to be extremely tense. Spain and Italy remain the main hotbeds of the COVID-19 outbreak, followed by France and Germany in terms of the number of infected people. Thus, all three leading economies of the eurozone were seriously affected by the pandemic.
The eurozone is seriously threatened by a recession, and the Finance Ministers of the 19 countries of the currency bloc will discuss measures to save the region's economy. By the way, today the Eurogroup will meet to decide what financial mechanisms can be used to overcome the consequences of the coronavirus epidemic. As well as the issue of borrowing, where richer countries will have to help poorer and most affected States from COVID-19. This issue has always been difficult to solve, and even the current situation is hardly an exception. In fact, the countries most affected by the coronavirus epidemic were left to their fate by Brussels. For example, the main aid for Italy comes from Russia and China, while the EU structures only offer to create new funds.
In addition to the fact that the European Central Bank (ECB) buys up debt obligations of a number of countries of the currency bloc, there are other financial levers. However, everything must be carefully weighed and calculated so as not to cause even more damage.
As for the technical picture for the main currency pair of the Forex market, the decline was minimal at yesterday's trading.
Daily
After the formation of Monday's candle with a small bearish body and almost equidistant shadows, it seems that the pair may well turn around for a corrective pullback. In fact, this is exactly what happens at the end of the review. Again, I would like to draw your attention to the level of 1.0777, which kept the pair from a further decline over the last two trading days, and the trades closed above this level.
At the moment, the euro/dollar is trading near 1.0865 and may well continue to rise. If this happens, the quote can grow to the lower border of the Ichimoku indicator cloud and the Tenkan line, which are located near 1.0960. In other words, this is about another 100 points of growth.
H4
In this timeframe, the nearest target for possible continued strengthening is the price zone of 1.0920-1.0970, where 89 EMA (black), 50 MA (blue) and 200 EMA (orange) are located. In the same zone, the 50th level of correction on the Fibonacci grid, stretched to a decrease of 1.1143-1.0768, also passes. I drew the resistance line (red) at points 1.1484-1.146, which is also located near the selected zone.
Based on the emerging technical picture, with a high probability, I am inclined to assume a corrective pullback, the purpose of which will be the selected price area. I recommend considering opening short positions after the pair rises to the area of 1.0920-1.0970. An additional signal for sales will be bearish candlestick patterns on the four-hour and hourly charts. It is a little late for purchases, but those who want to try to buy EUR/USD aggressively and riskily when it goes down to 1.0850.
Good luck!
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