Trading plan for 25/01/2019:
Friday markets start in good sentiment and the leader on the currency market is GBP. USD and JPY are losing slightly. Stock exchanges in China and Japan grow despite a mixed session on Wall Street.
A lot of buzz appeared in the subject of the government shutdown. The US Senate rejected two acts that could release funding for public administration, extending the record paralysis to 35 days. Later, President Trump told the press that he was open to the agreement negotiated by the party leaders, "if there is a meaningful agreement". He added that he has "other alternatives" to finance the wall, though he did not say what. In addition, there is growing frustration in Congress due to government shutdown and calls for cross-party agreement. Nothing new in the subject of US-China trade talks. Next week, a Chinese delegation headed by Deputy Prime Minister Liu He is coming to Washington.
In the stock market, growth is driven by the bounce of technology companies on the basis of information from Europe. STMicroelectronics, a processor supplier for Apple, predicts a return to revenue growth. The company believes that slowing the demand for Apple products in China may not be as scary as the market is afraid. This boosted Nasdaq in New York by 0.66% (although Dow Jones and SP500 ended the day flat).
In Asia, Shanghai Composite gains 0.4 percent and Nikkei225 grows by 1 percent.
On Friday, the 25th of January, the event calendar is light in important data releases, but the global investors should keep an eye on IFO data from Germany, Survey of Professional Forecasters data from the Eurozone and Baker Hughes U.S. Rig Count data from the US. There is a speech from ECB's Jens Weidmann scheduled later in the day as well.
EUR/GBP analysis for 25/01/2019:
The European Central Bank did not surprise with its decision and maintained the reference rate at 0%, the deposit rate at -0.4%, and the bank plans not to change rates at least until the end of the summer of 2019. At the same time, the ECB predicts that it will reinvest funds allocated to QE still for the debt after the first rate hike.
In one of the last sentences of his speech, Mario Draghi states that the ECB may still exclude a friendlier development of economic events, thus somewhat offsetting the previous unequivocal dovish interpretation of his speech (quote: "the balance of risks for growth prospects shifted to the negative side"). Therefore, it seems that apart from the fact that the ECB notices deterioration in macro data, it does not give up hope and does not change its current attitude completely.
Let's now take a look at the EUR/GBP technical picture at the H4 time frame after the ECB decision was made. The market is still sinking like a stone, but the price has just bounced slightly from the technical support at the level of 0.8620. This is the key technical support level, because it is a lower range boundary, so any violation of this level will result in the acceleration of the sell-off and total bearish control over the price. Nevertheless, all of the candlestick patterns on the way down are indicate a bearish pressure, so any bounce might be just a local pull-back towards the nearest technical resistance level. One of them is seen at the level of 0.8655 and the next one is seen at 0.8679 - 0.8696.
Recommendations:
Due to the ongoing bearish pressure only sell orders should be opened during the local pull-backs. The nearest levels to open sell orders are 0.8655 and 0.0679-0.8696 zone. All already opened shorts should be still kept in play as there is more downside to come after the pull-back is done.
