26.02.202008:12 Forex Analysis & Reviews: Overview of the EUR/USD pair. February 26. Key members of the Fed's monetary committee see no reason to cut the rate

4-hour timeframe

Technical details:

Higher linear regression channel: direction - downward.

Lower linear regression channel: direction - downward

Moving average (20; smoothed) - sideways.

CCI: 170.0430

On Wednesday, February 26, The EUR/USD currency pair continues to be located just above the moving average line, which keeps the chances of continuing the upward correction against the three-week fall. In the first two trading days of the week, traders managed to move the pair away from three-year lows, however, the prospects for the euro still look very vague. It seems that after the end of the correction, the downward movement will be resumed in almost any case. The only thing that should be clarified is that the correction may take a very long period of time. We know that a pair can beat around the bush for a very long time, after which they start to fall.

The third trading day of the week will be particularly boring in terms of macroeconomic events. If traders received at least secondary data from Germany and the USA in the first two days, then on Wednesday such data will not be available. Despite this, the euro does not experience any lack of attention from traders. For the third day in a row, the euro/dollar pair is moving up. Although with difficulty, it overcomes the upper barriers. Although it does not have any fundamental reasons for growth, it still adds a little bit. We still believe that the current growth of the euro is exclusively corrective. There are plenty of factors that could influence the movement of the currency pair. However, it is absolutely clear that the reason for the growth of the euro is now a banal need to adjust after a three-week fall - not because of the "coronavirus" and new fears of a slowdown in the world economy. Meanwhile, many experts and analysts believe that due to the spread of the "coronavirus" and the negative consequences for the US economy, the Fed may reduce the key rate in 2020, perhaps even twice. We believe that it is too early to draw such conclusions. First, the US economy continues to feel generally good despite the fact that the latest data showed a decline in business activity in the services and manufacturing sectors of Markit. Second, the "coronavirus" has not yet acquired a large scale to have such a serious impact on the economy. Third, all developed countries, including the United States, have set a course to fight the "coronavirus". Fourth, the US stock market collapsed not because of the Covid-2019 virus itself, but because of investors' fears of a slowdown in the global economy, especially the US economy. As soon as scientists and doctors manage to localize and level the epidemic, investors will return their capital from the "safe haven" to risky assets. Thus, the fall in the US stock market is temporary.

Moreover, most Fed members do not see any need to ease monetary policy in 2020, unless the economy begins to slow at a high rate. For example, Cleveland Fed President Loretta Meister said that "coronavirus" is a negative risk for the US economy, however, it does not justify changes in monetary policy. Ms. Meister also said it was very difficult to assess the scale of the economic impact on the States at the moment. The head of the Federal Reserve Bank of Atlanta, Raphael Bostic, has a similar opinion. Mr. Bostic does not see the need to change the interest rate because he does not think that the "coronavirus" will have serious consequences for the US economy. Also, the head of the Atlanta Federal Reserve believes that the consequences of the virus will be serious for China. In a few months, "everything will return to normal," Bostic said. Neil Kashkari, the Chairman of the Minneapolis Federal Reserve, also spoke for the immutability of the current parameters of monetary policy. He said that it is too early to speculate on what measures the Fed will take in response to the situation with the pneumonia virus. Mr. Kashkari also echoed the view of Fed chief Jerome Powell, saying the US economy is in good shape despite the market situation. Recall that according to the latest information, the number of infected in America is 53 people.

Thus, we believe that as long as macroeconomic indicators in the US do not creep down, the Fed will not interfere with the parameters of monetary policy. In order for the Chinese virus to have such an impact on the world economy, the infection must be much more extensive.

The average volatility of the euro/dollar currency pair is 56 points per day. The volatility indicator continues to grow. However, given the weak macroeconomic background this week, it may soon fall back to its usual 40 points per day. Thus, on Wednesday, we expect movement between the borders of the volatility corridor of 1.0824-1.0936. A downward reversal of the Heiken Ashi indicator will indicate a new round of correction against the correction.

Nearest support levels:

S1 - 1.0864

S2 - 1.0803

S3 - 1.0742

Nearest resistance levels:

R1 - 1.0925

R2 - 1.0986

R3 - 1.1047

Trading recommendations:

The euro/dollar pair continues its corrective movement, formally - an upward trend. Thus, purchases of the European currency with the targets of 1.0925 and 1.0936 are relevant now since both channels of linear regression are directed downwards. You can return to sell positions after the price is fixed below the moving average line with the targets of 1.0803 and 1.0742.

In addition to the technical picture, you should also take into account the fundamental data and the time of their release.

Explanation of the illustrations:

The highest linear regression channel is the blue unidirectional lines.

The lowest linear regression channel is the purple unidirectional lines.

CCI - blue line in the indicator window.

Moving average (20; smoothed) - blue line on the price chart.

Murray levels - multi-colored horizontal stripes.

Heiken Ashi is an indicator that colors bars in blue or purple.

Possible variants of the price movement:

Red and green arrows.