Yesterday, the foreign exchange market was in a leading position from the stock market, which was declining against the general geopolitical background. The US stock index S&P 500 lost 1.55%, the dollar index rose by 0.70%, and the euro lost 90 points.
The demand for US government bonds (the yield on 5-year securities decreased from 1.72% to 1.56%) also increases the demand for dollars, which are used to buy bonds. It is likely that investors’ withdrawal from stock markets also directs cash flows into bonds and dollars. Such very strong correlations can last several weeks.
During this time, the euro may decline to the target level of 1.0910 – to the Fibonacci reaction line of 271.0%, perhaps even lower, to the target level of 1.0825 – this is the reaction level of 314.0%.
But the markets have yet to survive Friday’s US employment data, the forecast for which assumes 400,000 new jobs in the non-agricultural sector and a decrease in unemployment from 4.0% to 3.9%, and the main event is the Federal Reserve meeting on March 16, at which a slowdown in the expected pace of tightening may be announced.
But the markets are already preparing for this – investors are no longer waiting for a double increase in March (by 0.50%). On the daily scale chart, the signal line of the Marlin oscillator has reached the lower limit of its own descending channel and is now turning away from it into a correction.
The probability of price convergence with the oscillator has come to naught, which removes the risk of a high correction. The correction may take the form of consolidation, and then we expect the price to decline to 1.1060 and further to 1.0910.
A convergence has almost formed on the four-hour chart, but this is rather a sign of consolidation, since the Marlin is simultaneously shrinking into a triangle.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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