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From a comprehensive analysis, we see activity that many currency pairs could envy, however, the euro continues to surprise traders with its inertial course. Now, about the details. The given upward move last week acquired a scale of more than 400 points, where at first they could not think that a harmless correction would turn into a full recovery relative to the decline in February, and then return to the highs of the previously passed oblong correction. The lost profit syndrome (FOMO) overcame everyone at the moment of crossing the mark of 1.1000, where everyone instantly forgot about overbought, trend, and other circumstances that can not give the euro a different outcome than the decline.
I don't think it is worth mentioning the topic of changing the trend or resuming the main trend because it is best to work on the situation together with the background.
The corrective course is considered to be the main task at this stage. There is a characteristic shift at the beginning of the phase. But perhaps the maximum of the oblong correction (1.1180-1.1230) will serve as the starting point and if we refer to the existing behavior of the quote, then there is something in this.
As for the acceleration, the topic was touched upon yesterday, the return of the price back occurred several times faster than the descent, and in terms of regularity, this is a signal of the strongest overheating, in this case, long positions.
In terms of volatility, we see the same acceleration that we wrote about above: activity is again breaking records and the past day has surpassed the daily average by 198%. Such impressive indicators once again prove that FOMO was not enough.
Volatility details: Thursday-127 points; Friday-102 points; Friday-152 points. The average daily indicator relative to the volatility dynamics is 51 points (see the volatility table at the end of the article).
Analyzing the past day by the minute, we see that the upward movement set at 9:00 lasted until seven in the evening, where the quote touched the level of 1.1180, which displays the area of the conditional maximum of the oblong correction in history. The subsequent development was in terms of the rollback, which was put on the bet that this is the starting point of the future correction.
As discussed in the previous review, traders expected a correction from the level of 1.1080, however, this did not happen. I do not exclude that there were traders who went back to long positions after passing the level of 1.1080 and fixing at 1.1100.
Looking at the trading chart in general terms (the daily period), we see a huge gap in terms of interests, where the existing inertia is comparable to the dynamics of only the fall, which we often see in the market, but here the opposite situation turns out. Against this background, there were traders who began to make a reference to 2017, which may be a similarity, but under the circumstances, I would not make such extreme conclusions.
The news background of the previous day included the final index of business activity in the manufacturing sector of the eurozone, which rose from 47.9 to 49.2 with a forecast of 49.1. In the second half of the day, we published a similar index of business activity in the manufacturing sector from ISM, but already in the US, we recorded a decrease from 50.9 to 50.1 with a forecast of 50.2.
I doubt whether this set of statistics has affected the single currency in terms of growth, but in any case, the flow was in favor of the single currency.
In terms of the general information background, there was the start of the negotiations of the March negotiations between England and Brussels, where no loud statements or criticism were made on the first day. The parties kindly exchanged plans and outlined the topics of the upcoming talks, indicating that the areas of trade, energy, and fishing will be discussed in the coming days. In fact, all major actions will begin only on Tuesday, which was later confirmed by a representative of the European Commission.
In turn, ECB head Christine Lagarde was a little late, but still assessed the impact of the coronavirus on the economy.
"The situation with the coronavirus outbreak is developing very quickly and creates risks for the economic prospects and the functioning of financial markets. The ECB is closely monitoring events and their consequences for the economy," said Christine Lagarde.
Almost simultaneously with the head of the ECB, ECB Vice-President Luis de Guindos made comments about the regulator's readiness to adjust existing instruments from the coronavirus.
"We remain vigilant and will closely monitor all incoming data. Our further guidance will determine our monetary policy. In any case, the governing council is prepared to adjust all its instruments accordingly to ensure that inflation moves steadily towards its goal," said the ECB Vice-President.
Finally, a few words about the noise of the coronavirus and the Fed's interest rate. So, the administration of US President Donald Trump is considering measures that will reduce the impact of the coronavirus on the economy and markets. In particular, they intend to push the Fed to reduce the base interest rate. Let me remind you that the Federal Reserve System is not controlled by the administration and has the right to make a decision itself, but the noise, background pressure and the masses can theoretically put pressure on the opinion of the chairmen of the regulator.
Today, in terms of the economic calendar, we have preliminary data on inflation in the eurozone, which confirmed a slowdown from 1.4% to 1.2%. The market reaction to such an important indicator, which directly affects the monetary policy of the European Central Bank, was extremely mixed. In fact, we should have seen a downward turn, but as a result, we got a sluggish oscillation, as if the same FOMO syndrome is weighing on the common sense of market participants.
Further development
Analyzing the current trading chart, we see a weak correction, which is not quite typical in such circumstances. In fact, everything is just beginning, the area of 1.1180/1.1230 can play the role of a reference point, and the current sketch is similar to the outline of a future correction, which will be directed towards at least 1.1000. In this judgment, there is one "but", this is the same syndrome of lost profits, which right now puts pressure on sellers who can not go into the corrective phase. So, market participants need to air out or at least look around, since they have a vertical move behind them, and it can't be permanent. The current pullback is not enough for a full-fledged regrouping of trading forces. Thus, the work on catching the correction continues.
In terms of emotional mood, we see a solid FOMO, which puts a lot of pressure on the market.
By detailing every minute the available period, we see a conditional stagnation, in which there are small hints of a decline. In fact, this weakness is frightening, since everything can turn to the fact that the quote will return back to 1.1180.
In turn, some intraday traders have already climbed into short positions after working out the level of 1.1180. The first prospect is in the area of 1.1080. In turn, FOMO followers consider the breakdown of the mark of 1.1180 as another round of long positions, where the entry is made already at the mark of 1.1160.
It is likely to assume that in the event of a decline in the FOMO syndrome, the correction will still occur, where a relatively inertial course is waiting for us to descend to the area of the level of 1.1000, possibly lower. If the FOMO does not fall, and the hype is not at the limit, then there is a variant of oscillation in the range of 1.1100/1.1155.
Based on the above information, we will output trading recommendations:
- Buy positions are considered in the plan based on the noise of the syndrome higher than 1.1160, in the direction of 1.1180-1.1230.
- Sell positions in the form of correction are considered lower than 1.1095, in the direction of 1.1080-1.1060-1.1000.
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that the indicators of technical instruments are under the pressure of inertia, giving a signal to buy. Minute intervals variably slide in the available rollback.
Volatility for the week / Volatility Measurement: Month; Quarter; Year.
The volatility measurement reflects the average daily fluctuation from the calculation for the Month / Quarter / Year.
(March 3 was based on the time of publication of the article)
The current time volatility is 55 points, which is already 7% higher than the daily average. It is likely to assume that the characteristic acceleration will still persist in the market due to the FOMO syndrome, as well as the information background.
Key levels
Resistance zones: 1.1180; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.
Support zones: 1.1080**; 1.1000***; 1.0950**; 1.0850**; 1.0775*; 1.0700; 1.0500***; 1.0350**; 1.0000***.
* Periodic level
** Range level
*** Psychological level
***** The article is based on the principle of conducting a transaction, with daily adjustments.
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