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The EUR/USD pair is currently at another crossroads. I will briefly list the key technical points. Last week the pair moved above previous highs and triggered buy orders; the same thing happened again this week. The price also reached and tested the Imbalance 11 level. A small price decline from the current level would cancel the bullish trend. Thus, in the near future either Imbalance 11 must be invalidated, in which case the bullish trend will resume—which is the most preferable scenario—or the bullish trend will be broken. In fact, several other scenarios are also possible, but at the moment these are the most obvious ones.
In my opinion, without a new escalation of the conflict in the Middle East, it will be extremely difficult for the dollar to continue strengthening and for the bears to keep advancing. I would like to remind you that last week traders ignored important data on the U.S. labor market and unemployment, and earlier they also ignored the GDP report for the fourth quarter. These are precisely the kinds of data that should have knocked the U.S. currency out. Yesterday Trump spoke about a possible end to the war in the near future, and such peaceful rhetoric should calm the oil and gas markets. Lifting sanctions on Russia would give many countries an alternative to energy supplies from the Middle East. And most importantly, Trump expected a blitzkrieg in Iran but instead received the prospect of a prolonged conflict. In my opinion, the U.S. president will not agree to a months-long war with Iran.
Last week, as expected, a bearish Imbalance 11 was formed, and this week it has been tested. A full reaction to this pattern may take quite a long time, but the trend remains bullish, so one should think twice before opening short positions. In any case, a sell signal has not yet formed—and it may not form at all.
The chart picture still signals bullish dominance. The bullish trend remains, but at the moment bulls do not have enough reasons for a new offensive. For the European currency to rise, the war in Iran must ease and oil and gas prices must continue to decline. To open new long positions, new bullish patterns are needed or at least a liquidity sweep of the last two bearish swings.
The information background on Tuesday was rather scarce, but I remind you that last Friday traders ignored the Nonfarm Payrolls and unemployment reports. Therefore, it does not matter much whether important publications appear during the day. The pair is moving under the influence of completely different factors—geopolitical and energy-related.
In recent months bulls have had a huge number of reasons to attack, and even with the start of the war in the Middle East their number has not decreased. Structurally and globally, Trump's policies—which led to a serious decline of the dollar last year—have not changed. In the near future the U.S. currency may strengthen due to investors fleeing risk, but this factor cannot support it indefinitely. Meanwhile, the dovish prospects of FOMC monetary policy, Trump's trade war with the entire world, weakness in the U.S. labor market, two government shutdowns, U.S. military aggression, the criminal prosecution of Powell, the slowdown in GDP growth, and other unpleasant factors for America are not cancelled by the conflict in Iran.
I still do not believe in a bearish trend. The dollar has received temporary support from the market, but it is not certain that this situation will last long. The blue line shows the price level below which the bullish trend can be considered finished. Bears still need to push the price down about 90 points to reach it, and even if they succeed I would still doubt the emergence of a bearish trend. In my opinion, the pair is showing a strong decline only due to geopolitical factors. Once that factor fades, what will the bears rely on to attack?
News calendar for the U.S. and the Eurozone:
On March 11, the economic calendar contains two entries, one of which is considered important. The information background may influence market sentiment on Wednesday. The market is not yet ready to sell the dollar, but bears have stopped attacking, and bulls may begin to apply pressure.
EUR/USD forecast and trader advice
In my opinion, the pair remains in the stage of forming a bullish trend. The information background sharply changed direction a week ago, but the trend itself remains intact. Therefore, traders need new patterns and signals in the near future to form short-term forecasts. If these are bearish signals (which is more likely), it is important to remember that the trend remains bullish and geopolitical factors usually do not have a long-term impact. If bullish signals appear (which would be much more preferable), traders will have the opportunity to open new long positions that do not contradict the trend.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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