Anti-risk sentiment among traders is gaining momentum due to the recovery of the US stock market, as well as the positive dynamics of the oil market and the optimistic news from China. The theme of "Shutdown" has so far faded into the background, although this issue has not lost its relevance. In other words, the market today decided that "the glass is half full" and not vice versa, after which the euro-dollar pair stopped its decline and is currently trying to return to the borders of the 14th figure.
The main reason for optimism was the situation in the US stock market. After the next collapse, the same rapid growth of the main indices yesterday followed, - moreover, historical records were recorded in some parameters. For example, the growth rate of the Dow Jones industrial index was the strongest in the entire observation history (referring to the period of one trading session). The indicator increased by 1086 points, thus adding 4.98% and reaching the level of 22878.45. The remaining indicators also completed trading in the "green zone" as the S & P 500 index increased by 116.6 points (that is, 4.9%) and the NASDAQ rose by 361.44 points, showing a positive trend of 5.84%. Exxon Mobil, Facebook, Chevron, Netflix and Amazon were up more than 8%, and Apple and Nike more than 7%.
It is noteworthy that the stock market turned around due to rather minor news, which in any other case would have been simply ignored by traders. So, one of the economic advisers to Trump told American journalists that Fed Chairman Jerome Powell would not be dismissed from his post and continue his work "with a 100 percent probability." Although this fact is obvious, market participants reacted positively to the official's words. Well, the "thin" market dictates its own rules of the game, so you shouldn't be surprised at anything in the pre-holiday period. Although even the experts were shocked by the powerful price dynamics - according to them, this is the strongest growth of the indices since spring 2009.
Reduced panic in the market was due to another factor. We are talking about the prospects of US-China trade relations. At the end of the G20 summit, the leaders of the United States and China decided to continue negotiations, which ideally should end with a broad trade deal. After that, the parties "dispersed to the corners of the ring," and for several weeks this topic remained in the shadow. In the conditions of such silence in the market, dark rumors spread that the negotiators could not find a common denominator again and the trade war would continue. But literally today, the Chinese Ministry of Commerce reported that the Chinese side will hold face-to-face trade negotiations with the Americans in January. Also, all this time Beijing and Washington have been conducting "intensive telephone consultations.", according to American journalists.
These are not the first negotiations of this nature, but in this case, they testify to the implementation of the November agreements of Donald Trump and Xi Jinping. It is also worth recalling that earlier, Beijing has already shown positive signals. In particular, the Chinese resumed purchases of soybeans and reduced tariffs for cars from the States. If the January negotiations succeed, the likelihood of a broad trade deal will increase in many ways and although there are still too many "ifs" in this scenario, such steps are only welcomed by the market, especially in conditions of low liquidity.
Against the background of such a fundamental picture, which literally changed its color in just a few days, the American currency feels uncomfortable. The dollar index balances between 96 and 95 points, not showing a pronounced dynamics. On the contrary, the euro-dollar pair restored almost all the lost positions in the morning, returning to the 14th figure. However, it is still risky to open long positions now. The fundamental background is too unreliable, and the pre-holiday volatility can deploy a pair without any clear reason. That is why it is better to give up on EUR/USD trading — or follow the technical analysis.
In terms of technical analysis, the growth of the EUR/USD pair is uncertain. Although the pair is located between the middle and upper lines of the Bollinger Bands indicator on the daily chart, it is also located within the Kumo cloud. The bulls of the pair need to confirm their dominance. First, it is necessary to overcome the upper line of the Bollinger Bands (mark 1.1430), and secondly, to consolidate above the upper boundary of the cloud, that is, above the 1.1515 mark. Only, in this case, it will be possible to talk about the priority of the northern movement. Up to this point, we are dealing only with correctional growth, the dynamics of which does not inspire confidence - especially in a "thin" market.
The material has been provided by InstaForex Company - www.instaforex.com