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21.02.2024 03:57 PM
Technical Analysis of EUR/USD for February 21, 2024

EUR/USD Ascends Within Bullish Channel Amid Market Optimism and FOMC Anticipation

The EUR/USD has continued its gradual ascent, encapsulated within a bullish channel that reflects the prevailing market sentiment. The 4-hour chart showcases a series of technical patterns that hint at an ongoing tug-of-war between bulls and bears, with the bulls currently having the upper hand.

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Technical Analysis:

The pair recently formed a 'Bullish Engulfing' pattern, which typically indicates a strong buying pressure and a potential reversal from any prior bearish sentiment. This pattern aligns with the pair's support at the 'Demand Zone' around 1.0791, marked by the 100-period Exponential Moving Average (EMA).

A rising trendline from point 'A' to point 'C' defines the lower boundary of the bullish channel. The Relative Strength Index (RSI) stands slightly above the midline at 57.12, suggesting that there is more room for upside before the market becomes overbought.

However, the 'Harami' pattern that appeared before the bullish engulfing suggests a pause in the uptrend, indicating that traders should remain cautious. As the market approaches the upper channel line, resistance near the 1.0840 level could cap further advances.

Fundamental Analysis:

The European indices opened flat or slightly higher, following a mixed session in the Asia-Pacific region. The Antipodean currencies (NZD and AUD) are capitalizing on Chinese index momentum and expectations of a Chinese economic rebound, outperforming in the G10 space, while traditional safe havens (JPY, USD, CHF) lag.

The economic calendar for the early part of the day is virtually empty, with no major macro reports expected during the European trading session or for most of the Wall Street session. However, two key events of the week are scheduled for this evening: the FOMC minutes publication at 20:00 GMT and Nvidia's Q4 earnings report after the Wall Street close at around 22:20 GMT.

Investors will be closely scrutinizing the FOMC minutes for clues about future monetary policy, while Nvidia's earnings could influence market sentiment, potentially affecting risk appetite and currency movements.

Central Bank Speakers:

  • 13:00 GMT - Fed Bostic
  • 13:30 GMT - BoC Gravelle
  • 14:00 GMT - BoE Dhingra
  • 10:30 GMT - Fed Collins
Trading Insights:

Traders should watch for the EUR/USD's reaction to the upper channel line. A breakout above 1.0840 could indicate a continuation of the uptrend, while a rejection could lead to a retest of the EMA supports. The release of the FOMC minutes and Nvidia's earnings report could introduce volatility, presenting opportunities for both bulls and bears.

As always, market participants should maintain risk management practices, considering the potential for sudden shifts in sentiment influenced by central bank communications and corporate earnings.

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Scenario for Bulls:

A bullish scenario would involve a confirmed break above the 1.0840 resistance, potentially extending gains towards the 1.0900 psychological mark, especially if the FOMC minutes reveal a less hawkish stance or Nvidia's earnings impress the market.

Scenario for Bears:

Conversely, bears could see an opportunity if the pair fails to breach the upper channel line, with a potential pullback towards the demand zone. Negative surprises in the FOMC minutes or disappointing Nvidia results could prompt a flight to safety, benefiting the USD.

The EUR/USD pair presents an interesting technical setup against a backdrop of significant fundamental events. Traders should prepare for possible swings in sentiment and remain vigilant as the market digests the incoming information.

Useful Links
Important Notice

The begginers in forex trading need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp market fluctuations due to increased volatility. If you decide to trade during the news release, then always place stop orders to minimize losses.

Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. For successful trading, you need to have a clear trading plan and stay focues and disciplined. Spontaneous trading decision based on the current market situation is an inherently losing strategy for a scalper or daytrader.

#instaforex #analysis #sebastianseliga

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