23.03.202114:13 Forex-elemzések és áttekintések: Depressing market prospects - EUR/USD and GBP/USD

Just one and a half months ago, many countries, including the Euro Block, were optimistic about the spring period, that a life-giving vaccine would correct the depressing situation with COVID, and restrictive measures would go down, as well as the daily number of coronavirus cases.

It is already the 23rd day of spring, but instead of easing the restrictive measures, we see prolongation and tightening. Many EU countries, including locomotives such as Germany and France, have extended the quarantine until mid-April, citing the poor situation in medical facilities and a strong increase in new cases of infection.

"Now we are in a very, very serious situation. The number of cases is growing exponentially, and the beds in the intensive care units are filling up again," said German Chancellor Angela Merkel.

In turn, the UK, which initially aimed to open its borders to tourists as much as possible, now plans to increase the duration of the ban on international travel for its citizens and quarantine for tourists entering the country. According to The Times, the government may approve tougher anti-covid measures by this Friday. In this case, until June 30, British citizens will be prohibited from leaving the country without a particularly compelling reason, such as medical treatment, the death of a relative, or a wedding. Otherwise, the desire to travel can cost you a fine of £5,000.

In turn, the head of the bioengineering company BioNTech, which created the COVID-19 vaccine, predicted that by the end of the summer of 2021, many European countries and the United States will no longer need to maintain a lockdown.

Suppose that the forecast coincides, but we will still receive a catastrophic blow to the economy, and what kind of recovery was discussed one and half months ago, if the situation with restrictive measures changes only by the fall.

Now you understand that taking into account the available data, the economy of the European Union and the UK may well go into a new cycle of weakening, and this will affect the exchange rate of the national currency.

What is happening in the market in terms of technical analysis?

Let's start with the analysis of the euro and the dollar, where there is price retention below the psychological level of 1,1950/1,2000/1,2050. This step increases the chances of sellers to prolong the correction course from the peak of the medium-term trend at 1.2349.

On the one hand, it may seem that the scale of the existing correction has already reached the desired value, this is true, but given the fact that recently the quotes have reached the area of the maximum trend of 2018, a change in trading interest is quite possible in the market.

Traders working with market cycles, at the end of December last year, were expecting a full-size correction, which may well turn into a stage of changing trading interest. In my analytical articles, I have repeatedly written about a possible scenario in the market.

The sterling against the US dollar, like its European counterpart, is in the stage of correction from the peak of the medium-term trend of 1.4224, where the scale of weakening is about 3.40% of the peak, which is only 460 points. If we take into account the fact that in a fairly short period, the sterling rate has strengthened by 24%, then a correction of 3% is nothing at such a large scale.

It is worth considering that during the maximum period, the quotes touched the area of the peak of the medium-term trend from 2018, and at that moment in history, there was a price reversal in the market. It is worth thinking about techies when building possible scenarios for the development of the market.

Expectations and prospects

The flow of information regarding vaccines and sanitation will continue to affect speculators and market quotes. Therefore, it is worth continuing to monitor media sources for burning (toxic) issues that will help you stay on top of the information noise.

As for trading recommendations, here, as before, the prospect of the dollar's growth in relation to competitors is seen.

If the price of the euro is kept below 1.1875, it may head towards the level of 1.1835, which reflects the local minimum of the correction. The greatest weakening of the euro is expected after the price has kept below 1.1835 in the four-hour period, which will open the way to 1.1650.

What is happening on the EUR/USD chart in terms of indicator analysis and market dynamics?

Analyzing different sectors of time frames, we see that technical instruments on the minute, hourly, and daily time frames signal a sell, which increases the chances for a further downward move.

In terms of market dynamics, a slight slowdown in volatility is recorded, but given the high coefficient of speculative transactions, local jumps in the market are not excluded.

The sterling, after a short stagnation during the previous day, still managed to bring together sellers, as a result, a short-term flat at 1.3820/1.3875 became a full-fledged leverage towards the forecasted support level of 1.3750.

In this situation, there may be a reduction in the volume of short positions and a rollback/stagnation relative to the level of 1.3750. To resume the downward sentiment, market participants need to stay below 1.3750 in a four-hour period, which will open the way to 1.3650-1.3560.

What is happening on the GBP/USD chart in terms of indicator analysis and market dynamics?

Analyzing different sectors of time frames, we see that technical instruments are unanimously signaling a sell, and this is understood since we have an update of the minimum of the corrective move.

In terms of market dynamics, an acceleration of volatility by 91% relative to the previous day is recorded, which indicates a high interest of speculators in the market.