4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - upward.
Moving average (20; smoothed) - sideways.
CCI: -74.2912
The EUR/USD currency pair was not traded on Friday, as the entire foreign exchange market was closed on this day due to the celebration of Catholic Christmas. Thus, the technical picture has not changed at all. The pair still show slurred movements that may be related to the festive atmosphere at the end of last week and throughout this one. Thus, now it is very useful to have lower timeframes, where changes are more clearly visible. The fundamental background at the end of last week was very weak, and it will remain so at the beginning of this week. However, as long as there is a Donald Trump in the US, the news will always flow to the foreign exchange market.
Earlier, we have repeatedly written that Washington did not achieve the desired results in the trade war with China. Recall that Donald Trump wanted to achieve a reduction in America's dependence on China, the return of all American enterprises from China to the United States, as well as the settlement of the trade balance, which was previously strongly in favor of Beijing. A year ago, it became clear that Washington had failed to achieve any of the above. American businesses, despite the tax breaks promised by Trump and threats to raise taxes for them, have not returned to the United States. Because it is simply unprofitable economically. The labor force in China is several times cheaper, so even with Trump's taxes, it will be cheaper to produce goods in China. The introduction of tariffs on imports from China has leveled the trade balance between these countries a little, but overall the US trade deficit has increased even more since the start of the trade war, and China's trade surplus has grown even more. Therefore, the United States may have achieved the local goal of reducing the trade deficit with China, however, it has allowed China to further strengthen its position in the international arena.
However, we are not the only one who considers the US trade balance. Economic scientists from Germany conducted a whole study, the results of which showed that the trade deficit with China slightly decreased last year, and this year it increased again. All the sanctions and duties against other countries (Canada, Mexico, Argentina, Japan, South Korea, and several others) also did not bring any results, the trade balances with them practically did not change. Thus, it was also not possible to stimulate its production. German scientists said that the Americans themselves suffered primarily from Trump's protectionism policy: new jobs were not created, and Chinese goods simply rose in price in the United States. Similar American goods did not buy more. According to some estimates, tariffs against various countries have caused about 75,000 Americans to lose their jobs in the States. Manufacturing enterprises were affected.
German scientists also note that the new US President Joe Biden is likely to continue the course of Donald Trump and maintain a tough attitude towards China. However, unlike his predecessor, he is unlikely to act so rudely and directly. Most likely, Biden will try to build a dialogue with all participants in the global battle. With China – to resolve the trade conflict, with the European Union – to oppose China as a pair. Joe Biden will also take a different path in the development of American industry. The Democratic president will likely seek to invest in industries in which he wants to increase competitiveness compared to Chinese goods. It may take more than a year for the investment to produce results, but such a strategy can have long-term positive results.
Well, while the whole world is waiting for a change of power in the United States, Donald Trump continues to cling to power with the last of his strength. But since he had already exhausted all his ways of protesting the results, he decided to resort to Republican senators for help. It is the Republicans who control the US Congress, so Trump believes that they could and can protect him in a dishonest election. "It's time for Republican senators to step up and fight, as Democrats would have done if they had won. The evidence is indisputable," Trump wrote on Twitter. "If the election was rigged and stolen from a Democrat, with evidence of this level, Democratic senators would consider it a war and fight to the death. Mitch McConnell (the head of the Republican majority in the Senate) and other Republicans did nothing to restore justice and democracy. No fight!" Trump also wrote on Twitter. "The Justice Department and the FBI did nothing about election fraud, the largest in the nation's history, despite overwhelming evidence. They should be ashamed. History will remember everything," Trump wrote on Twitter a little later. Well, a little later, the US Supreme Court also got into trouble: "The US Supreme Court was incompetent and showed its weak position on the issue of mass fraud in the 2020 elections. We have irrefutable evidence, but they don't want to see it. If we have corrupt elections, then we have no country!"
And at the same time, the confrontation between Donald Trump and the US Congress continues. It is reported that the Democrats wanted to increase the "coronavirus payments" to Americans following the requirement of Donald Trump from $ 600 to $ 2000, but this initiative was blocked by Republicans. Then the Republicans proposed to change the amount of aid to foreign countries, which Trump also demanded, but this initiative was blocked by the Democrats. Since the budget bill is already being discussed, the lack of a common opinion can lead to a halt in funding for all public services, in other words, to a "shutdown". Avoiding another "shutdown" under Donald Trump will only be possible if Congress approves a temporary budget by the end of December 28. But this temporary budget will not include a package of economic stimulus measures due to the pandemic. Joe Biden criticized Donald Trump for refusing to sign the stimulus package, which was previously agreed by both Democrats and Republicans. Biden believes that Trump's behavior is "completely irresponsible" and will have "devastating consequences for the economy".
The volatility of the euro/dollar currency pair as of December 25 is 76 points and is characterized as "average". Thus, we expect the pair to move today between the levels of 1.2105 and 1.2257. The reversal of the Heiken Ashi indicator to the top signals a new round of upward movement.
Nearest support levels:
S1 – 1.2146
S2 – 1.2085
S3 – 1.2024
Nearest resistance levels:
R1 – 1.2207
R2 – 1.2268
R3 – 1.2329
Trading recommendations:
The EUR/USD pair is trying to continue its downward movement. Thus, today it is recommended to stay in the sell orders with the targets of 1.2146 and 1.2105 until the Heiken Ashi indicator turns up. It is recommended to consider buy orders if the pair is again fixed above the moving average with targets of 1.2257 and 1.2268. Now the volatility of the pair has fallen significantly, there are signs of a flat.
The material has been provided by InstaForex Company - www.instaforex.com