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From a comprehensive analysis, we see the continuation of the correction course, where the maximum of the beginning of the week could no longer restrain buyers. And now about the details. The variable chatter within the level of 1.0850 served as a kind of regrouping of trading forces, where the price still managed to fix above the level and as a fact update the maximum of the correction move. In fact, we see a rebound, where the quote went more than 300 points from the lows, eventually bringing us closer to the Fibo level of 38.2.
In this case, I do not think that the correction will be completed soon, since under these circumstances we may encounter local movements, where due to high activity they may have the value of a full tact.
This theory considers a different perspective on price fluctuations, where trends fade into the background, and the panic mood forms local movements based on the flow of negative external background.
At the same time, the long-term outlook remains unchanged, where the single currency will continue to be under the most severe pressure in comparison with the US dollar, and this is confirmed by the economic component of the eurozone, which was experiencing bad times before the pandemic.
In terms of volatility, we see the lowest indicator for nine trading days, which was 133 points, but this value exceeds the daily average by 30%. In fact, the acceleration continues to persist in the market for more than a month, where speculative positions were taken even by those traders who previously did not consider this approach as an optimal solution.
Volatility details: Monday-155 points; Tuesday-183 points; Wednesday-115 points; Thursday-278 points; Friday-166 points; Monday-151 points; Tuesday-234 points; Wednesday-243 points; Thursday-326 points; Friday-194 points; Monday-191 points; Tuesday-160 points; Wednesday-133 points. The average daily indicator relative to the volatility dynamics is 102 points (see the volatility table at the end of the article).
Analyzing the past day by the minute, we see that the main round of ascending positions occurred with the start of the American session, where the quote broke through Tuesday's maximum of 1.0888 and formed a local stagnation.
As discussed in the previous review, traders had two scenarios for buying and selling at once, but after the quote went above the level of 1.0850, long positions became indisputable.
Looking at the trading chart in general terms (the daily period), we see that the corrective move played back the inertia movement by more than a quarter, but relative to the main downward trend, this movement is not even visible.
The news background of the past day had data on orders for durable goods in the United States, where they were waiting for another decline of 0.7%, but eventually got an increase to +1.2%. This became a kind of temporary stop, but after that, the dollar began to lose positions again.
In terms of the general information background, we can see that the raging coronavirus continues to set new records for the number of cases of infection, where the increase over the last day was 48,537 (471,270 cases in total). It is worth noting that over the past day in the United States, the increase in infected people was 13,679, and since the beginning of the week, we are talking about more than 40,000.
The indicators scare so many investors that the markets are under extreme pressure. In turn, against this background, the head of the Federal Reserve Bank (FRB) of St. Louis, James Bullard, says that in the near future, 46 million Americans may be out of work in the short term.
His words clearly have common sense, because if we look at the forecasts for unemployment claims, which will be published today, there is an absolute shock. Initial claims for benefits in the States should grow from 281,000 to 1,090,000, and such figures have not yet been seen in history. Thus, theoretically, we can see a local collapse of the labor market.
At the same time, Bullard considers the US economic recovery in the 3rd quarter of 2020, and the production boom is expected in the 4th quarter and early 2021.
"We are not talking about moving production to the second quarter. The general idea is to "lay low" and wait out the virus... If we do everything right and events develop the same way as in China, then the third quarter will be a transition, the business will return to work online. And then in the fourth quarter and the first quarter of next year, we will see a boom in production, because there will be a kind of deferred demand, there will be a lot of things that have not been done and that will need to be done," the head of the St. Louis Fed said in an interview with CNBC.
As early as this morning, it was reported that the US Senate approved a bill to support the economy by almost $2 trillion. According to the bill, the funds are intended to support the economy and citizens of the country, where it is planned to increase unemployment benefits by $600 a week and extend payments to additional groups of former employees, launch a small business support program for $350 billion, allocate $500 billion to finance various sectors of the economy, support cities, and States.
Further development
Analyzing the current trading chart, we see that the single currency continues to move in the structure of the correction course, where the Fibo level of 38.2 has already been almost reached. In fact, we see investors' fear of the consequences of the virus, which is already reflected in the disastrous number of unemployment claims in the US. Local movement on the current background can be saved, but note that it is local, although it will not have small scales.
In terms of emotional mood, we see a panic, as we have written above more than once, but any panic creates activity, where you can earn a lot in local operations.
Detailing the minute-by-minute available section of time, we see a slight stagnation in the night section, but at the start of the Europeans, long positions updating the highs of the correction appeared again.
In turn, traders are considering a further upward move if the price is fixed above 1.0950.
We can assume that in this situation, we can only work on local fluctuations, which at this time have not small values. If the figures for applications in the States are confirmed, the growth of the local euro will be inevitable in the direction of 1.1100-1.1050. An alternative scenario is considered, the one where the statistical data will not be so disastrous, where the quote will go lower than 1.1890 and there we enter short positions.
Based on the above information, we will output trading recommendations:
- Buy positions should be considered after fixing the price higher than 1.0950, with the prospect of a move to 1.1000-1.1050.
- We consider selling positions if the price is fixed below the area of 1.0890, with the prospect of a move to 1.0850-1.0775.
Indicator analysis
Analyzing different sectors of timeframes (TF), we see that due to the local upward movement in the correction structure, indicators at hourly intervals signal a purchase. Daily intervals unshakably preserve the sell signal.
Volatility for the week / Measurement of volatility: Month; Quarter; Year.
Volatility measurement reflects the average daily fluctuation from the calculation for the Month / Quarter / Year.
(March 26 was based on the time of publication of the article)
The volatility of the current time is 80 points, which is lower than the average. We can assume that the dynamics will soon accelerate, exceeding the daily average, due to the massive external background and statistical data.
Key levels
Resistance zones: 1.1000***; 1.1080**; 1.1180; 1.1300; 1.1440; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.
Support zones: 1.0850**; 1.0775*; 1.0650 (1.0636); 1.0500***; 1.0350**; 1.0000***.
* Periodic level
** Range level
*** Psychological level
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