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Forex Traiding

the safe dollar is back in the game, but not for long



DATE OF PUBLICATION: 2021-02-26 10: 07: 51The euro-dollar pair yesterday renewed its one and a half year high, reaching 1.2243. It would seem that everything was in favor of the further development of the northern trend. The European currency was strengthening throughout the market, while the dollar index showed the opposite dynamics, dropping below the key 90-point mark. As the saying goes, “nothing boded trouble” – buyers of eur / usd had every chance to finally gain a foothold within the 22nd figure. But life has made its own adjustments, complicating the already difficult rebus of a fundamental nature. Geopolitics came into play, with the news last night that the United States launched an airstrike on Syria. This is the first US military operation since the inauguration of Joe Biden as president. According to Bloomberg, the target of the attack on the Americans was objects at a border checkpoint in eastern Syria. According to the CIA, these military facilities were used by several militant groups at once. We are talking about the Kataib Hezbollah and Kataib Said al-Shuhadah groups, which are allegedly supported by Iran. According to other sources, the blow was struck at an object that directly belongs to the Iranian armed forces. The mention of Iran in this context is of key, fundamental importance – including in the context of the foreign exchange market. The growth of anti-risk sentiment is directly related to the fact that the press again started talking about the prospects of a “big war” between Iran and the United States. Yesterday’s airstrike, in fact, was a continuation of the conflict that almost led to a military confrontation last year. Let me remind you that on January 3, 2020, the influential Iranian general Qasem Soleimani was killed in Baghdad. Later, official Washington admitted that a high-ranking Iranian military official was liquidated as a result of an American special operation. In response, the Iranians fired at two US military bases in Iraq. At this stage, many expected a further escalation of the conflict, but Donald Trump did not increase the heat and did not say anything about a military response. He only promised to introduce additional sanctions against Tehran. By and large, this is where the phase of the conflict between the United States and Iran, associated with the assassination of an Iranian general, ended. But at the same time, most experts on the Middle East were convinced that the problem was essentially not resolved, which is why countries “will continue to slide into a big war.” This year, after the actual election of Joe Biden, the situation in the region began to escalate again. For example, over the past six weeks, militants have struck several strikes on facilities used by US military personnel and diplomats. Rockets fell near the US embassy in Baghdad, and at Balad airbase (where the personnel serving the fighters are located), and near Erbil International Airport, where five US citizens were injured. In each case, the United States was accused of organizing the attack by militants allegedly backed by Iran. Today, for the first time, there was a military response: at the direction of President Biden, the United States launched airstrikes on targets of pro-Iranian groups in Syria. In other words, the current escalation of the conflict should be viewed through the prism of previous events. At the beginning of last year, when Iran and the United States were on the verge of a “big war,” the safe dollar behaved in a similar way, strengthening throughout the market (especially against the background of the first news regarding the spread of the coronavirus). At that time, the eur / usd pair dropped by more than 200 points in response to geopolitical factors. To date, the response is similar, but on a smaller scale. In my opinion, the greenback is unlikely to organize a further “dollar rally”. This option is likely only in the case of retaliatory actions from Iran (even verbal). But, according to a number of political analysts, Tehran will not “play out” this case, maintaining, so to speak, “meaningful silence.” There are several reasons for this – this is the negotiations on the nuclear deal and the “Astana process”, and the pressure of economic sanctions. All this suggests that the strengthening of the US dollar is likely to be temporary. Now a few words about the technique. And although with outbursts of anti-risk sentiment technology fades into the background, this case is an exception. The fact is that despite a fairly strong strengthening of the American currency throughout the market, bears eur / usd could not go below the 21st figure. Against the background of the impulsive growth of the greenback, sellers could well approach the main resistance level of 1.2080 (the middle line of the Bollinger Bands indicator, which coincides with the Kijun-sen line on the daily chart). But in reality, the bears did not even test the intermediate support level of 1.2130 (Tenkan-sen line on D1), thereby confirming the “viability” of the northern trend. In my opinion, the current price downturn can be used as an excuse to open longs with targets at 1.2200 and 1.2243 (the upper line of the Bollinger Bands on D1 and the one and a half year high reached yesterday, respectively). Material provided by InstaForex – www.instaforex.com Source – InstaForex

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