General analysis EURUSD for 31.03.2022
Current dynamics
EUR/USD strengthened significantly on Tuesday and Wednesday, making new monthly highs. Today the pair lost just under 100 pips on the release of weak macroeconomic statistics in the Eurozone.
The main driver of the euro growth earlier this week was the negotiations between Russia and Ukraine in Turkey. The Russian side promised to reduce military activity in Chernihiv and Kyiv, which contributed to the strengthening of the European currency. Also worth noting is the drop in US government bond yields, which weakened the dollar. However, over the past two days the information background regarding the Russian-Ukrainian talks has changed dramatically. The Russian authorities stated that the negotiations in the Turkish capital did not actually bring the parties any closer to an agreement, as the demands of official Kiev were overstated and unacceptable. It is highly probable that the Russian Federation will resume its aggressive offensive, which is a strong factor for the pressure on EUR.
Another important issue is the possible energy crisis that will inevitably affect all industry in the Eurozone. The energy issue is particularly acute for Germany which has already lowered its GDP forecast for 2022 from 4.6% to 1.8%. The economic sentiment of business and households has fallen to a record low, according to the monthly survey. Worth noting is a rise in consumer prices to 7.6%, significantly above the forecast of 6.8%. Also retail sales data in Germany were worse than forecast in January. The labor market showed a more modest gain than expected which is a negative signal for declining consumer spending against the backdrop of rising inflation. Today in the afternoon the pair slowed down after the publication of negative statistics on the US labor market. Initial jobless claims rose to 202K, which is 14K more than in the previous period.
Support and resistance levels
On the 4h chart, the instrument is testing the Bollinger Band mean, which is the key support. The indicator is showing signs of a sideways reversal and the price range has contracted slightly, indicating the start of a correction. The MACD histogram is in the positive zone, holding a buy signal. Stochastic is preparing to enter oversold area, a signal to open long positions may be formed in the next 1-2 days.
- Support levels: 1.0845, 1.0890, 1.0940, 1.1000, 1.1060.
- Resistance levels: 1.1130, 1.1170, 1.1225.
Trading scenarios
- Short positions should be opened below the level of 1.1060 with a target of 1.0980 and a stop-loss at 1.1110. Implementation period: 1-2 days.
- Long positions can be opened above the level of 1.1135 with a target of 1.1195 and a stop-loss at 1.1090. Implementation period: 1-2 days.