17.03.202604:15 Forex Analysis & Reviews: EUR/USD Overview. March 17. ECB Meeting on the Horizon

The EUR/USD currency pair has shown a semblance of correction on Monday, which means absolutely nothing. What do we mean by this? After a 400-pip decline in the European currency since the onset of the war in the Middle East, any rise appears to be a correction. The situation concerning the EUR/USD pair is entangled to the point of impossibility. Just two weeks ago, the upward trend seemed indisputable, but now the daily chart's upward trend, if not broken, is on the brink. The most interesting thing is that the macroeconomic or fundamental backdrop typically aligns well with technical analysis. In other words, traders simply need to forecast global fundamental events and economic trends, as technical analysis usually reflects the true state of affairs in the market and trader sentiment. However, when geopolitics comes into play, forecasting anything becomes futile. Thus, the technical picture simply breaks down, complicating the analysis and forecasting process even further.

Currently, for example, a clear downward trend is visible on the 4-hour timeframe. But is this part of a correction on the daily timeframe, or the beginning of a new trend on the same chart? The answer will depend not on technical analysis but on geopolitics. And predicting developments in the Middle East, as we've established, is impossible. Over the past few days, we have learned several important points. First, Iran is not planning to lift the blockade of the Hormuz Strait, and now Yemen may join in blocking the Bab al-Mandab Strait. There is probably no need to discuss what this would mean for oil...

Second, the entire world continues to turn its back on Donald Trump. As we have pointed out before, most countries prefer not to fight with Trump but to cooperate on his terms. They understand that there is no other option. Either you accept the ultimatums of the White House leader, or you face tariffs, sanctions, or war. However, at any convenient opportunity, a knife will be plunged into Trump's back instantaneously. For example, now the majority of European countries have refused to provide Trump with their airfields and military bases so that American troops can more easily strike Iran. EU countries do not understand why they should get involved in a war in the Middle East simply because the US president decided so. Moreover, France and Italy have already initiated direct negotiations with Iran to unblock the Hormuz Strait for their tankers. No one wants to fight for Trump's ambitions.

In the United States, it is thought that Trump started the war in Iran just to divert public attention from the "Epstein files," in which his name appears over 3,000 times. Trump himself has once again been offended by Europe and threatened it with the collapse of NATO if European countries do not stand up for US interests in the Middle East... Classic Trump. Thus, the ECB meeting this week, at which a decision to change key rates will almost certainly not be made, has very little significance. Traders will still have to rely on the lower timeframes for trading and follow local movements.

The average volatility of the EUR/USD currency pair over the last 5 trading days as of March 17 is 84 pips, which is considered "average." We expect the pair to move between levels 1.1395 and 1.1563 on Tuesday. The higher linear regression channel has turned sideways, indicating a potential trend reversal. The CCI indicator has once again entered the oversold area and formed a "bullish" divergence, but even technical signals are currently unimportant.

Nearest support levels:

S1 – 1.1475

S2 – 1.1353

S3 – 1.1230

Nearest resistance levels:

R1 – 1.1597

R2 – 1.1719

R3 – 1.1841

Trading Recommendations:

The EUR/USD pair continues to decline, which no longer resembles a correction. The global fundamental backdrop remains extremely negative for the dollar. However, the market has been focusing solely on geopolitics for several weeks now, making all other factors irrelevant. If the price is below the moving average, short positions can be considered with targets at 1.1395 and 1.1353. Above the moving average line, long positions remain relevant, with targets at 1.1963 and 1.2085, but for this scenario to play out, the geopolitical backdrop needs to stabilize.

Explanations for Illustrations:

Linear regression channels help determine the current trend. If both are directed in the same way, it means the trend is currently strong;

The moving average line (settings 20,0, smoothed) determines the short-term trend and the direction in which trading should currently be conducted;

Murray levels are target levels for movements and corrections;

Volatility levels (red lines) indicate the likely price channel in which the pair will operate over the next 24 hours based on current volatility indicators;

The CCI indicator—its entry into the oversold area (below -250) or the overbought area (above +250) suggests that a trend reversal in the opposite direction is approaching.