EUR/USD. Overview for March 27. Preview of the week: European inflation
March 27, 2023 10:22 am
The downward trend that started on Thursday was still ongoing for the EUR/USD currency pair on Friday. The past week was pretty chaotic as a whole. Although the European currency managed to demonstrate excellent development, the “swing” appears to have come to a stop. However, there is no indication that a new increase has started. The pair has currently adapted to the moving average line and is unsure of what to do next. We do not see how the European currency can continue to rise in the medium term, as we have stated numerous times. In our opinion, the increase of 1,500 points in the second half of last year was already excessive and did not reflect the underlying context. The pair was unable to even normally adjust after this turn of movement to the north (only 500 points). Following that, the Fed and ECB raised their key rates once more, and the European regulator started to openly suggest that the rate would only rise by 0.25% in May. As before, the rate will be heavily influenced by inflation. And the European Union will publish its report this week.
On the 24-hour TF, it is evident that the pair’s recent increase has essentially had no impact on the technical situation at hand. The pair increased to just above its most recent local maximum but was unable to break through it. Friday’s decline pushed the pair back to the Senkou Span B and Kijun-sen lines. Therefore, what is taking place could be described as a continuation of the flat or “swing.” Therefore, simply because it cannot continue to move up, the price may continue to decline this week.
Few macroeconomic statistics will be available.
This week, there won’t be many significant occurrences in either the European Union or the United States. In light of the lack of a recent clear trend in either the pound or the euro currency, let me remind you that the “foundation” and macroeconomics currently have a very indirect impact on the movement of the pair. Local influence is thus feasible, but traders currently do not share a similar viewpoint on a worldwide scale. On Monday, several ECB officials will speak at the European Union. Tuesday has nothing. The ECB’s Isabel Schnabel will speak on Wednesday. German inflation on Thursday. Friday’s topics are unemployment and inflation. As you can see, traders can only be somewhat interested in information about inflation in Germany and the EU. Of course, speeches by members of the ECB monetary committee are fascinating, but even Christine Lagarde does not always provide the market with crucial information, and the regulator’s meeting just took place. There shouldn’t be any additional comments from ECB members since no significant macroeconomic data have been received at that time.
Forecasts indicate that inflation may start to decline significantly by the end of March in both Germany and the EU. Remember that by the end of February, many may infer that the ECB’s initiatives had been ineffective as inflation began to rise once more in many EU countries. However, if it decreases from 8.5% to 7.2-7.4% in March, it will be a big step in the right direction. Is it worthwhile to reiterate that the ECB has less justification for raising rates as inflation declines faster? The question of how high the rate will ultimately be lifted will be decided once the regulator again slows the pace of tightening in May. The euro currency may be prevented from generating a cycle of development by a sharp decline in inflation and a slowing in the rate of tightening, both of which currently appear improbable. As a result, we don’t think it’s worthwhile to wait for the euro to strengthen. The market may already be in a prolonged stage of consolidation, during which we’ll see alternating movements of 200–300–400 points in each direction. Therefore, rather than growth continuing, a drop to the level of 1,0500 this week is far more possible.
As of March 27, the euro/dollar currency pair’s average volatility over the previous five trading days was 113 points, which is considered to be “high.” So, on Monday, we anticipate the pair to move between 1.0658 and 1.0884. The Heiken Ashi indicator will turn back up to signal the start of the upward movement.
Nearest levels of support
S1 – 1.0742
S2 – 1.0620
S3 – 1.0498
Nearest levels of resistance
R1 – 1.0864
R2 – 1.0986
R3 – 1.1108
Trading Suggestions:
A round of downward correction has begun for the EUR/USD pair. In the event of an upward reversal of the Heiken Ashi signal or a price recovery from the moving average, we may now take into account opening additional long positions with targets of 1.0864 and 1.0884. After the price is fixed below the moving average line, short positions can be opened with targets of 1.0658 and 1.0620.
Explanations for the illustrations:
Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.
The material has been provided by InstaForex Company – www.instaforex.com
The downward trend that started on Thursday was still ongoing for the EUR/USD currency pair on Friday. The past week was pretty chaotic as a whole. Although the European currency managed to demonstrate excellent development, the “swing” appears to have come to a stop. However, there is no indication that a new increase has started. The pair has currently adapted to the moving average line and is unsure of what to do next. We do not see how the European currency can continue to rise in the medium term, as we have stated numerous times. In our opinion, the increase of 1,500 points in the second half of last year was already excessive and did not reflect the underlying context. The pair was unable to even normally adjust after this turn of movement to the north (only 500 points). Following that, the Fed and ECB raised their key rates once more, and the European regulator started to openly suggest that the rate would only rise by 0.25% in May. As before, the rate will be heavily influenced by inflation. And the European Union will publish its report this week.
On the 24-hour TF, it is evident that the pair’s recent increase has essentially had no impact on the technical situation at hand. The pair increased to just above its most recent local maximum but was unable to break through it. Friday’s decline pushed the pair back to the Senkou Span B and Kijun-sen lines. Therefore, what is taking place could be described as a continuation of the flat or “swing.” Therefore, simply because it cannot continue to move up, the price may continue to decline this week.
Few macroeconomic statistics will be available.
This week, there won’t be many significant occurrences in either the European Union or the United States. In light of the lack of a recent clear trend in either the pound or the euro currency, let me remind you that the “foundation” and macroeconomics currently have a very indirect impact on the movement of the pair. Local influence is thus feasible, but traders currently do not share a similar viewpoint on a worldwide scale. On Monday, several ECB officials will speak at the European Union. Tuesday has nothing. The ECB’s Isabel Schnabel will speak on Wednesday. German inflation on Thursday. Friday’s topics are unemployment and inflation. As you can see, traders can only be somewhat interested in information about inflation in Germany and the EU. Of course, speeches by members of the ECB monetary committee are fascinating, but even Christine Lagarde does not always provide the market with crucial information, and the regulator’s meeting just took place. There shouldn’t be any additional comments from ECB members since no significant macroeconomic data have been received at that time.
Forecasts indicate that inflation may start to decline significantly by the end of March in both Germany and the EU. Remember that by the end of February, many may infer that the ECB’s initiatives had been ineffective as inflation began to rise once more in many EU countries. However, if it decreases from 8.5% to 7.2-7.4% in March, it will be a big step in the right direction. Is it worthwhile to reiterate that the ECB has less justification for raising rates as inflation declines faster? The question of how high the rate will ultimately be lifted will be decided once the regulator again slows the pace of tightening in May. The euro currency may be prevented from generating a cycle of development by a sharp decline in inflation and a slowing in the rate of tightening, both of which currently appear improbable. As a result, we don’t think it’s worthwhile to wait for the euro to strengthen. The market may already be in a prolonged stage of consolidation, during which we’ll see alternating movements of 200–300–400 points in each direction. Therefore, rather than growth continuing, a drop to the level of 1,0500 this week is far more possible.
As of March 27, the euro/dollar currency pair’s average volatility over the previous five trading days was 113 points, which is considered to be “high.” So, on Monday, we anticipate the pair to move between 1.0658 and 1.0884. The Heiken Ashi indicator will turn back up to signal the start of the upward movement.
Nearest levels of support
S1 – 1.0742
S2 – 1.0620
S3 – 1.0498
Nearest levels of resistance
R1 – 1.0864
R2 – 1.0986
R3 – 1.1108
Trading Suggestions:
A round of downward correction has begun for the EUR/USD pair. In the event of an upward reversal of the Heiken Ashi signal or a price recovery from the moving average, we may now take into account opening additional long positions with targets of 1.0864 and 1.0884. After the price is fixed below the moving average line, short positions can be opened with targets of 1.0658 and 1.0620.
Explanations for the illustrations:
Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.
The material has been provided by InstaForex Company – www.instaforex.com
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