The EUR/USD currency pair continued to be located below the moving average line during the penultimate trading day of the week. Both linear regression channels are directed downwards, and the CCI indicator recently "visited" the overbought area. Thus, all technical factors and signals are now on the side of the US dollar. As well as the absolute majority of fundamental, macroeconomic and geopolitical factors. To be honest, we can't even immediately remember the last time there was such a situation that almost all the factors that affect the market were in favor of only one currency. The European economy is frankly weaker now and may weaken further due to the food and energy crisis. The ECB is not going to raise the key rate, so there is nothing to fight with rising inflation. The geopolitical conflict in Eastern Europe works primarily against the euro and supports the "safe" dollar. Wherever you throw, there is a wedge everywhere. Thus, we believe that in the medium term, the European currency will decline. The most interesting goal is price parity with the dollar.
And what speaks in favor of the European currency? Oddly enough, only the weakness of the dollar can save the euro. To do this, the economic situation in the States should become dramatically worse than it is now. But how is this possible? The United States is very far from a geopolitical conflict. They are independent of energy and energy carriers of the Russian Federation, grain, and products from Ukraine. The Fed has already announced that it will raise rates at every meeting in 2022 to curb inflation. Even if the United States somehow inexplicably finds itself involved in the conflict in Eastern Europe, they will not be fighting on their territory. Thus, so far, even theoretically, it is difficult to imagine what can save the euro currency.
EU Summit, G-7 meeting, NATO Summit
Since the macroeconomic picture is now absolutely clear and does not require any additional explanations, the market's attention has quite reasonably shifted back to geopolitics. In Ukraine, there has been a lack of progress on both sides in the last two weeks. Yes, there are local victories, but neither the Ukrainian military nor the Russian ones are moving forward. Neither Kyiv nor Moscow can achieve their goals and objectives, and they cannot come to a consensus in negotiations. In the context of this situation, the following events that will take place in the coming days are very important. We are talking about the NATO summit, the G-7 leaders' meeting, as well as the EU summit. This is practically the same event and the same pressing issues will be discussed at it. It should be understood that the most high-profile topics that have been in the information field in recent weeks have probably already been resolved and will not even be raised by summit participants. Europe will not impose an embargo on Russian oil and gas, Poland will not provide Ukraine with military aircraft, NATO will not close the skies over Ukraine.
Nevertheless, a lot of other, less high-profile issues will certainly be raised. Yesterday, it became known that the US and the EU are increasing military assistance to Ukraine. We are talking about new arms supplies, new cash injections, new humanitarian convoys. Thus, indirectly, Western countries continue to strengthen assistance to Ukraine. But no one is trying to help Russia yet. For some time, the topic of China's military assistance was actively discussed in the media, but there was no confirmation of this. China's top officials have publicly declared that they occupy a neutral status and support the sovereignty and independence of all countries of the world. Belarus, according to some media reports, was supposed to send its troops to Ukraine on March 21, but Alexander Lukashenko has not yet given such an order. The media often reports that the Belarusian military does not want to take part in this military operation, which does not concern them at all. The Syrian mercenaries, who were also trumpeted by various media outlets, are not yet going to Ukraine. Thus, the situation is "all against one". However, this "one" is a very strong piece on the chessboard. The world continues to stand on the threshold of a global war, as stated by many military experts and political scientists.
The volatility of the euro/dollar currency pair as of March 25 is 77 points and is characterized as average. Thus, we expect the pair to move today between the levels of 1.0908 and 1.1064. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward movement.
Nearest support levels: S1 – 1.0986; S2 – 1.0864; S3 – 1.0742.
Nearest resistance levels: R1 – 1.1108; R2 – 1.1230; R3 – 1.1353.
Trading recommendations:
The EUR/USD pair continues to be located near the moving average. Thus, new long positions with targets of 1.1063 and 1.1108 should now be considered if the price is fixed above the moving average. Short positions should be maintained with targets of 1.0908 and 1.0864 until the Heiken Ashi indicator turns upwards.
