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FX.co ★ EUR/USD: Is changing the trend worth it?

EUR/USD: Is changing the trend worth it?

The Euro's growth amounted to 7% last year. It has grown by 15.50% since the spring collapse of 2020, which is a very strong price change, despite the fact that the eurozone encountered plenty of problems.

According to the reports of large banks, the eurozone economy may decline again at the beginning of this year. This is because the pandemic is not receding, which leads to a double recession.

The fear of a worsening epidemiological situation comes from a new strain of coronavirus that has come from the UK and is spreading throughout Europe. This could lead to a delay and tightening of quarantine measures, which will affect the economy.

Bloomberg Economics predicts that the EU economy will reduce around 4% in the first three months of 2021. And based on pessimistic assumptions about how long restrictive measures will last, they had previously forecast growth of 1.3%.

Meanwhile, JPMorgan estimates that the EU economy experienced a massive 9% drop in the fourth quarter of 2020, with a current forecast of 1% decline in the first quarter of this year up from its previous forecast of 2% growth.

UBS also expects the economy to slow down 0.4% in the first quarter, compared with previous expectations of 2.4% growth. At the same time, Goldman Sachs predicts a slight reduction in EU GDP.

Based on such pessimistic expectations, the EU economy may continue to be under pressure, which will lead to the euro's decline in the first half of the year.

Most economists predict that the economic recovery will begin in the second quarter after more than a year of suffering from the coronavirus. The rebound can initially be dramatic, once the restrictive measures are lifted and the infection subsides as most of the population is vaccinated.

In this scenario, the European economy will begin to recover, while other countries will be relieved after a painful pandemic.

What do we have on the trading chart?

Since the beginning of the year, the EUR/USD pair has been in the correction stage from the peak (1.2349) of the medium-term upward trend from January 6. The coordinates 1.2130 serve as a variable support in the correction structure, which reflects the interaction area of trade forces from December 16 and 21. At this stage, a pullback occurred, followed by stagnation.

In terms of market dynamics, yesterday's daily activity amounted to 94 points, which is 22% higher than the average level. Speculative mood persists in the market, as reflected in volatility and trading volumes.

If we look at the trading chart on a daily period, there is an upward trend in the medium term, where the current correction is only with a slight pullback.

EUR/USD: Is changing the trend worth it?

Further prospect of price development:

Analyzing the current EUR/USD trading chart, it can be seen that the stage of a pullback from the support point of 1.2130 led to a subsequent stagnation, which is expressed in the limits of the amplitude of 1.2130/1.2180.

Market stagnation is likely to be reduced to a cumulative process, which will interest speculators and lead to a new round of acceleration. The most optimal trading tactic is considered to be the method of breaking a particular border, where the priority is given to short positions, considering the current correction.

General recommendations:

- Buying a pair at a price above the level of 1.2180, with the prospect of moving to 1.2215-1.2270, is recommended.

- Selling a pair at a price below the level of 1.2130, with the prospect of moving to 1.2070-1.2000, is recommended.

The price should hold outside the established borders in the four-hour time frame to confirm the best signal.

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EUR/USD: Is changing the trend worth it?

Indicator analysis

Analyzing the different sectors of time frames (TF), it can be seen that the technical indicators on all periods have a sell signal, as the price is in the correction stage.

EUR/USD: Is changing the trend worth it?

Weekly volatility / Volatility measurement: Month; Quarter; Year

The volatility measurement reflects the average daily fluctuations, calculated per Month/Quarter/Year.

The current dynamics is only 41 points, which is the lowest value in the market. It is worth considering that the price movement within the established range will most likely lead to a cumulative process, or even to an activity growth by the time a particular border is broken.

EUR/USD: Is changing the trend worth it?

Key levels

Resistance zones: 1.2350 **; 1.2450 **; 1.2550 ***; 1.2825.

Support zones: 1.2170 *; 1.2000 ***; 1.1890-1.1900-1.1920 **; 1.1810 *.

* Periodic level

** Range level

*** Psychological level

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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