General analysis EURUSD for 21.02.2022

Current dynamics

On Monday EURUSD got stronger during the Asian session, but in the first hours of the European session the pair went down after the publication of weak statistics from Germany. The business activity index in the manufacturing sector of Germany declined from 59.8 to 58.5 points in February. Business activity in the manufacturing sector of the Eurozone is also demonstrating a negative trend.

At the same time, fundamentally, the pair has a steady potential for growth. During the last weeks, this trading instrument has reacted more to the geopolitical situation than to the macroeconomic publications. Leaders of France, Russia, and the USA are ready to hold the summit, where the situation in Ukraine will be discussed. This news has a positive impact on the euro, as a military invasion before the Putin-Biden meeting is practically ruled out. In addition, it should be noted that the ECB is preparing the markets for a gradual adjustment of its monetary policy. A month ago Christine Lagarde said that rates will remain low in 2022. Now the situation has changed and experts are predicting a near-term will hike in December, while the futures market is predicting a rate hike in October.

Meanwhile, a number of committee members said that a 50 basis point rate hike in March is too drastic a step early in the cycle. New York Fed Chairman Williams and Fed Vice Chairman Lael Brainard advocated a gradual rate hike and the beginning of a balance sheet unwinding. Market participants see this as a signal that rates will be raised less aggressively than the market expects. A return to cautious rhetoric of the Fed strengthens the euro. The current monetary policy will lead to a slowdown in U.S. GDP and the pair may reach the 1.2000 level by the end of the year.

Support and resistance levels

On the 4-hour chart, the instrument trades near the lower boundary of the Bollinger Bands, which is strong support. The indicator is directed sideways and the price range is significantly reduced, indicating a correction. The MACD histogram is consolidating near the zero mark and there is no signal to open positions. Stochastic also does not give a clear signal to enter the market.

• Support levels: 1.1245, 1.1285, 1.1325.
• Resistance levels: 1.1360, 1.1385, 1.1430, 1.1465, 1.1490.

Trading scenarios

• Long positions can be opened at the current price with a target of 1.1430 and a stop-loss at 1.1275. Implementation period: 1-2 days.
• Short positions should be opened below the level of 1.1290 with a target of 1.1240 and a stop-loss at the level of 1.1320. Implementation period: 1-2 days.