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Hello, dear colleagues!
The external background for the main currency pair euro/dollar was determined yesterday by the comments of high-ranking officials from Europe. In particular, in her speech, yesterday, the President of the European Central Bank (ECB), Christine Lagarde, slightly adjusted the figures for the decline in Eurozone GDP due to COVID-19. While the bank previously expected the region's economy to fall by 5-12%, Lagarde said yesterday that the likely contraction of the economy this year will be 8-12%. The head of the ECB explained that the previous forecasts are no longer relevant, and the final GDP data will be determined as new, even more recent, data is received. Now it is difficult to determine whether Lagarde's speech affected the optimistic mood of market participants, especially since ECB Vice-President Luis de Guindos expressed doubts about the ability of some EU countries to cope with the debt burden, which has increased in the context of the pandemic.
European Commission President Ursula von der Leyen presented to European parliamentarians a plan to restore the EU economy. According to von der Leyen, the coronavirus will inevitably turn into a recession, to combat which the member states of the European Union need to allocate grants and loans. The President of the European Commission outlined the amount of grants at 500 billion euros and the amount of loans proposed at 250 billion euros. At the same time, the allocated funds will be included in the 7-year budget of the European Union and will become a common debt.
Given the high credit rating, it is proposed to borrow funds on the financial markets, because the situation is exceptional and requires urgent measures.
Yesterday, German Chancellor Angela Merkel held a press conference, during which she said that a good foundation has been created for the creation of a bailout fund for the Eurozone economy, but the way out of the economic crisis caused by COVID-19 will not be simple and quick. The main task will be to do everything necessary to ensure that the created fund begins to function effectively from the beginning of 2021.
Daily
It is not clear whether the comments of high-ranking officials and significant macroeconomic statistics have a significant impact on the price dynamics of the main currency pair. The technical picture suggested continued growth of EUR/USD, which is exactly what happened in yesterday's trading. However, we must admit that the pair was trading quite volatile, and investors were feeling nervous.
As predicted the day before, there was a pullback to the broken 89 exponential moving average, after which the quote turned up. The maximum values of yesterday's session were shown at 1.1030, and the closing price was fixed at 1.1005. I believe that this is a very positive result for the euro bulls. We have already mentioned the strength and significance of the psychological level of 1.1000, and now the first daily candle appeared, which closed above this important mark, especially since at 1.1020, there is a 200-exponential moving average, which yesterday stopped the further upward movement of the quote.
Today, at the moment of writing, the euro/dollar continues its upward dynamics and is trading near 1.1027. In the case of a census of yesterday's highs, euro bulls will have to raise the price to the upper border of the Ichimoku indicator cloud, which passes at 1.1065. I think that the future fate of the main currency pair will be decided here. Once again, I would like to draw your attention to the fact that 1.1065 is a very strong technical level, and its true breakdown will open the way to higher prices. The most important day, at the end of which players need to raise the pair up from the Ichimoku cloud and break 1.1065. This may not happen today, but the task is obvious.
If the results of today's trading show a bearish candlestick pattern with a closing price below 200 EMA and the mark of 1.1000, I assume another pullback to 89 EMA (1.0942). If the pair falls below the 89 exponential and gets fixed under it, the breakout will have to be recognized as false and prepare for the subsequent decline of EUR/USD.
H1
After a short-term decline under the middle line (dotted) of the ascending channel, the rate turned around and began to grow again. During today's Asian session, the pair has already risen to 1.1034, then rolled back to 1.1005. Here, the euro/dollar gained support and turned to strengthen.
Judging by market sentiment and the technical picture on the timeframes considered, the rise of EUR/USD is likely to continue. The ascending scenario will confirm the update of the current highs at 1.1034.
Trading recommendations for EUR/USD:
Given the good prospects for further strengthening of the exchange rate, the main trading idea is to buy, which can be opened at the breakdown of 1.1034 or after the actual breakdown, on a pullback to this level. Another option for opening long positions will be a short-term pullback to the area of 1.0995-1.0985, but in this case, it is better to see candles that signal the pair's readiness to resume growth.
If the resistance zone of 1.1030-1.1034 shows reversal candlestick signals, you should think about selling. For both positioning options, I don't recommend setting large goals. It is better to fix purchases near 1.1075, and sales around 1.0985.
Good luck!
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