4-hour timeframe
Technical details:
Higher linear regression channel: direction - up.
Lower linear regression channel: downward direction.
Moving average (20; smoothed) - up.
CCI: 78.3586
The first trading day of the week passed in a corrective movement, however, the EUR/USD pair worked out a moving average line, but failed to gain a foothold below it, which saves the bulls chances of a new upward trend. In principle, following the euro's two day growth, the pair has been corrected as expected and now technical factors allow us to count on the resumption of the upward movement. However, in addition to technical factors, there are also fundamental, as well as macroeconomic ones. In brief, I recall that the fundamental factors remain on the side of the US currency for the following reasons: a stronger US economy, a more hawkish monetary policy by the Federal Reserve, the same pace of slowdown in the economies of the United States and the European Union, as well as the same signs of economic recovery. Macroeconomic factors are also in favor of the dollar this week so far: US manufacturing activity indices have increased and left the red zone below 50.0, business activity indices in the manufacturing sector of the EU have shown low growth, but most of them remained in the recession zone. Thus, at the moment, we have a certain conflict between fundamental and technical factors, and we believe that the upward movement will not be strong and long.
Only minor macroeconomic publications are planned in the EU and US on Tuesday, February 4. For example, the producer price index for December will be released in the EU, which, according to experts, will decrease by 0.7% y/y. Production orders for December will be published in the US, with a forecast of +1.1% m/m. However, it is unlikely that traders will react to any of these reports. We can only note the value of the producer price index, as it can affect the value of inflation.
We already said in the final article for February 3 on the EUR/USD pair that Donald Trump can already be considered acquitted. Democrats were not able to attract even more witnesses to the case, but managed to stretch the entire process of considering it in the Senate as much as possible. In principle, the fact that the Senate refuses to impeach Trump was known with a probability of 99% from the very beginning. We have already said that the essence of the entire trial for the Democrats was the trial itself. The longer it lasts, the longer Trump is exposed in an unsightly light for himself before the electorate, which already in November 2020 will have to make a choice. Thus, we can only wait for the official results of the Senate vote on Wednesday and put a bullet in this matter. As for Trump's ratings, many agencies note that at this time they are at their highest values. But will these values be enough for the American people to choose an odious president for the second time? Social surveys say that 52% of Americans believe that Trump really violated the law by blocking military assistance to Ukraine, and also urging Vladimir Zelensky to launch an investigation into the activities of the Biden Democrats in Ukraine. 53% of Americans believe that the president did obstruct Congressional work by refusing to cooperate with the investigation of his own impeachment case. Thus, more than half of the electorate is now opposing Trump.
Trump himself feels calm, has stopped criticizing the Fed and Jerome Powell, has stopped scribbling daily opuses on Twitter about the "witch hunt" and in his exceptional style has managed to call Michael Bloomberg, one of the main Democratic presidential contenders, "short." "It's all right," Trump said, "you can be short. He (Michael Bloomberg) wants the box to stand on during the debate, but there is nothing wrong with that." Naturally, Bloomberg's spokesman Julie Wood immediately reacted, saying the US president was lying again. "He's lying all the time, he's a pathological liar," said Wood.
From a technical point of view, we are now waiting for the price to rebound from the moving and resumption of the upward movement with the update of the previous peak price. The macroeconomic background will be extremely weak tomorrow, so nothing should prevent the influence of technical factors on the pair's movement. In the event of consolidating the euro/dollar quotes below the moving average, the trend will change again to a downward trend.
The average volatility of the EUR/USD currency pair has increased due to trading on Friday and Monday to 47 points per day. Now this value is already average. Thus, on the second trading day of the week, we expect movement between the boundaries of the volatility band at 1.1012 and 1.1106. The steam will tend to lean towards the development of the upper boundary.
Nearest support levels:
S1 - 1.1047
S2 - 1,1017
S3 - 1,0986
The nearest resistance levels:
R1 - 1,1078
R2 - 1,1108
R3 - 1,1139
Trading recommendations:
The euro/dollar began to adjust. Thus, purchases of the European currency with goals of 1.1078 and 1.1106 are relevant now, but we recommend that you wait for the correction to complete and only then should you start buying. It is recommended to return to selling the EUR/USD pair no earlier than consolidating the price below the moving average line, which will change the current trend to a downward trend, with targets at 1.1017 and 1.0986.
In addition to the technical picture, fundamental data and the time of their release should also be taken into account.
Explanation of illustrations:
The highest linear regression channel is the blue unidirectional lines.
The smallest linear regression channel is the purple unidirectional lines.
CCI - blue line in the indicator window.
Moving average (20; smoothed) - a blue line on the price chart.
Murray levels - multi-colored horizontal stripes.
Heiken Ashi is an indicator that colors bars in blue or purple.
Possible price movements:
Red and green arrows.
The material has been provided by InstaForex Company - www.instaforex.com