Gold bulls face important test at $1,850.

Trading 19 Jan 2021 Commentaire »

Gold price is moving higher but still below the key pivot level of $1,850. Over the last few weeks we mentioned many times the importance of the $1,850 level both as support and as resistance. It is an important pivotal level that when broken could dictate the trend for next weeks.

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Red lines - bullish divergence

Blue line - resistance

Yellow rectangle - target if resistance is broken

Gold price is trading below the blue resistance trend line. The recent lows in price are not followed by a new RSI low. As we mentioned yesterday there are signs of bullish divergence. If bulls manage to recapture $1,850 then we should expect at least a move towards the yellow rectangle area at the $1,866-70 area. Next target would be the $1,890 level. Until then bears remain in control and a rejection combined with a lower low is still in play.

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Bullish hammer pattern in EURUSD.

Trading 19 Jan 2021 Commentaire »

EURUSD yesterday reached our target at the key 38% Fibonacci retracement and formed a hammer candlestick pattern followed by a bullish candle today. This combination implies more upside should be expected.

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Green line - support trend line

Black lines - Fibonacci levels

Yesterdays Daily candle was a hammer candlestick with a lower shadow. Today's upward move completes the reversal signal and as long as price is above yesterday's lows we expect a move higher. Our initial target was achieved at the 38% Fibonacci level. It would be ideal to see price test the longer-term green support trend line, but market prices do not always move in an ideal pattern

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Although USD bears believe in their success, the dollar could still surge

Trading 19 Jan 2021 Commentaire »

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The dollar has risen in price by almost 2% since the beginning of the year, which caught many investors by surprise, as they expected the greenback to fall further.

The confidence of the dollar bears was shaken when the Democrats gained control of both houses of Congress. Traders began to quote an increase in fiscal stimulus in the United States. This was reflected in the sell-off in the US government bond market. As a result, treasury yields returned to more attractive levels, allowing the dollar to strengthen.

On Monday, the USD index rose above 90.9 points for the first time since December 21.

Most analysts still expect the greenback to weaken this year amid the recovery of the global economy after the end of the coronavirus crisis.

Citigroup experts presented one of the most bearish forecasts for the dollar, saying that it could fall in price by 20%.

According to the Commodity Futures Trading Commission (CFTC), speculators increased the volume of net short positions in USD last week by the most since 2011.

"The speculative community is now turned in a bearish direction against the US currency, and there is a good reason for this: the fundamentals continue to point to a weakening of the dollar in the medium term," said strategists at Lombard Odier.

However, if speculative investors start to get out of their positions, the greenback can sharply jump.

"If a broad rally of the dollar will take place, it is likely due to a partial collapse of positions in any strong decline in risk sentiment, which has not happened since the flooding of the market with liquidity in response to the beginning of the pandemic," Saxo Bank said.

"If the COVID-19 vaccines are less effective than we expect, and the global economy stumbles, the US currency, which remains a safe haven asset, will rise in price," analysts at The Goldman Sachs warn.

"The sudden return of risk aversion is not our baseline forecast. Instead, a more serious obstacle to the continuation of the bearish trend in the USD will be the change in the dollar's behavior, caused by good news from the United States. The cyclical strength of the United States and the pent-up economic downturn in the country, along with the discussion about the merits and timing of the Fed's spending cuts, should limit the scope and duration of the trend towards a weakening of the US currency," HSBC experts said.

The greenback attracted sellers near 91 points and retreated to 90.4, having sank more than 0.3% on Tuesday, a day before the inauguration of the newly elected US President Joe Biden, which will undoubtedly be one of the main events of the current week.

Market participants expect that the newly minted head of the White House will immediately deal with the fate of the $1.9 trillion stimulus package, which he announced last week.

The EUR/USD pair rose above the 1.2100 level today, recovering from the lows of the current year near 1.2050, amid a return of interest in risk in the expectation of additional fiscal stimulus in the United States.

"The main currency pair withstood the initial test of the 55-day moving average around 1.2058 and recovered to the 1.2100 area. In the event of a breakthrough of the 55-day moving average, the drawdown will continue in the direction of 1.2014 (September high) and further - to 1.1969," Commerzbank specialists said.

"If the uptrend (1.1969) and the 23.6% Fibonacci retracement level relative to the growth from March 2020 (1.1945) still hold out, in the medium term the pair will continue to strive towards 1.2556 (2018 high) and 1.2624 (where the 200-month moving average passes). The loss of the 1.1945 level will deepen the fall to 1.1602-1.1612, " they added.

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GBP/USD. In anticipation of British inflation: pound ready to storm the 37th figure

Trading 19 Jan 2021 Commentaire »

The pound is stuck at the bottom of the 36th figure against the dollar, waiting for the next information driver. That driver could be tomorrow's UK inflation report. If the main indicators come out in the red zone, the market will go back to talking about the prospects of introducing a negative rate by the Bank of England. Rumors about this have been going around for quite a long time – since the beginning of the coronavirus crisis. And although some members of the British central bank are skeptical of this idea, the idea itself (even in a hypothetical context) keeps market participants on their toes. A disastrous inflation report will put this issue back on the agenda, putting corresponding pressure on the pound.

Let me remind you that traders were disappointed in the latest data on the growth of British inflation. In particular, the overall consumer price index on a monthly basis plunged into the negative area, ending up at -0.1% with a forecast increase to 0.6%. Thus, inflation was at the level of August, when the next coronavirus restrictions were introduced in Britain. The core consumer price index came out at 1.1%, slowing for the first time after two months of growth. The indicator also fell short of the forecast values, demonstrating a decrease in price pressure.

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The December figures, which will be published tomorrow, should show the opposite trend. Preliminary forecasts suggest that the overall index will leave the negative zone on a monthly basis and reach 0.3%, while on an annual basis the indicator will accelerate to 0.5%. The producer price index should also come out of the negative area (it is expected to grow to 0.6% m/m after a decline to -0.3%). The other components of the release, in particular, the producer purchase price index and the selling price index, should demonstrate similar dynamics.

As you can see, the preliminary forecasts for tomorrow's release are positive. But this is the well-known insidiousness of the situation: inflated expectations can be a disservice, literally and figuratively. In the event that the stated forecasts do not come true, the pound will be under significant pressure, especially against the background of ongoing conversations about the feasibility of introducing a negative rate. If we talk directly about the GBP/USD pair, then the 37th figure is at stake here, with the prospect of growth to annual highs (1.3725) and beyond. And vice versa – if the report turns out to be a failure, then the bears will have an excellent reason to return to the bottom of the 35th figure.

It should be noted here that the inflation release is important in itself, while in the current conditions we should consider it in the context of the prospects for easing monetary policy. In just two weeks – the Bank of England will hold its first meeting of the year on February 4. At the previous meeting, BoE Governor Andrew Bailey stressed that the issue of introducing a negative rate is still under deliberation, so it is not advisable to talk about it in a practical plane. The BoE has been studying this issue for six months – the central bank's economists interact with the country's financial institutions, modeling and analyzing the consequences of this step. First of all, possible side effects for the country's banking sector are being studied.

The central bank organized a large-scale study, in which the country's financial institutions had to express their opinion on reducing the rate to zero or below zero. The financial institutions had to send their responses to the relevant requests by mid-December. It is expected that at the February meeting, the British central bank will present the results of its research and announce a general verdict on the prospects for a rate cut in the negative area. In this context, a weak inflation release will be on the side of the GBP/USD bears, as in this case, the supporters of the dovish scenario will have additional arguments in their favor. But there is also a flip side to the coin – if tomorrow's indicators are at least at the forecast level, the bulls will strengthen their position, especially against the background of the dollar's vulnerability.

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Indirect inflation indicators that were published earlier suggest that inflation is unlikely to disappoint - despite the quarantine restrictions in the UK, which were in effect in December. Therefore, in my opinion, the priority for the GBP/USD pair remains with long positions. From a technical point of view, the growth scenario also looks more likely: on the daily chart, the price is between the middle and upper lines of the Bollinger Bands indicator, as well as above all the lines of the Ichimoku indicator. The initial target of the upside movement is 1.3710, the upper Bollinger Bands line at D1. To gain a foothold within the 37th figure, buyers of GBP/USD need a sufficiently powerful informational reason (or a general large-scale weakening of the greenback), therefore, when such a goal is achieved, it is better to close long positions by taking a wait-and-see attitude.

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Analytics and trading signals for beginners. How to trade EUR/USD on January 20? Analysis of Tuesday. Getting ready for Wednesday

Trading 19 Jan 2021 Commentaire »

Hourly chart of the EUR/USD pair

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The EUR/USD pair continued its upward movement on Tuesday, which had begun the day before. And at the end of the day, it managed to overcome the upper border of the descending channel. Thus, the downward trend was canceled, and the upward trend was formed. Consequently, you should consider bull trading again. Novice traders had reason to open buy orders today when the quotes settled above the channel. However, as we warned in the previous articles, after the pair rose by around 50 points, it could not show a strong upward movement. Thus, it went up another 30 points and the movement began to dry out. The MACD indicator may turn to the downside at the current candlestick, which will mean a signal to close long positions. After that, it will be necessary to wait for the indicator to discharge to the zero level and create a new buy signal. But with sales, novice traders will now have to wait. Perhaps even a few days. Sell orders currently require the current upward trend to be undoubtedly reversed.

No important report from Europe and America on Tuesday, January 19. The euro rose, but we can not conclude that this growth was based on any fundamental events. Everyone is ready for a change of president in America. Joe Biden's Inauguration Day will be held on Wednesday. We were worried that the markets might get nervous about this, but nothing like that! Trading takes place in an extremely calm atmosphere. As we mentioned above, there is no reason to assume that the fundamental background has influence on the pair's movement. Therefore, you should continue to trade exclusively on technical signals.

On Wednesday, January 20, besides the report on inflation in the European Union for December and the inauguration of Joe Biden, there is nothing to pay attention to. The consumer price index is expected to remain unchanged. And the inauguration is a very formal process. If Donald Trump does not urge his supporters to "go to the Capitol" (which certainly does not make any sense), then the whole procedure will be quiet and calm. We do not know what will happen next. So far, the US dollar has lost 5 cents since Biden was proclaimed as the US president. It can be concluded that the dollar no longer likes Joe Biden. If so, then we can expect a long-term decline in the dollar. But this does not mean that the dollar will fall in price for the next four years.

Possible scenarios on January 20:

1) Long positions became convenient since the price settled above the descending channel. However, all resistance levels have already been overcome today, and the MACD indicator is about to turn down. Thus, we recommend waiting for a downward correction, after which a new buy signal is formed. This will not happen until Wednesday morning, and maybe later. Therefore, we will take tomorrow's targets.

2) Trading for a fall has been canceled. Now, to resume trading down, the price needs to make it clear that the downward trend has resumed. To do this, an ascending channel or trend line must be formed, and therefore canceled. Or, the price should fall below the current local low of 1.2055. Nothing of the kind is expected until tomorrow morning at least.

On the chart:

Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.

Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.

Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.

The MACD indicator (14,22,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).

Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.

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German Economy To Grow 3.5% This Year, IMF Says

Trading 19 Jan 2021 Commentaire »

Germany's economy is set to grow 3.5 percent this year after a 5.4 percent contraction in the coronavirus-hit 2020, the International Monetary Fund said in a report released Tuesday. The economic recovery in the biggest euro area economy would be choppy and unevenly distributed across sectors, and with quarterly swings conditioned by volatile infection dynamics through early 2021, the IMF said in the Article IV Consultation report.

"The recovery should firm up once there is wide distribution of effective vaccines, but output is not expected to return to its pre-crisis level until 2022," the report said. "The baseline projection is subject to unusually large uncertainty, with risks tilted to the downside as resurgent infection waves may trigger renewed or prolonged lockdowns and deepen economic scarring."

Germany's export dependence and financial openness also make it vulnerable to shocks to external demand, the lender said. Longstanding challenges related to population aging, infrastructure gaps and an impending green energy transition will be compounded by structural changes ushered in by the pandemic, the IMF added. The unemployment rate is forecast to rise to 4.3 percent from 4.2 percent.

The short-time work program, known as Kurzarbeit, should remain the main pillar of labor market support during the economic recovery, the report said.

That said, the IMF stressed the importance of additional measures targeted at groups hard-hit by the pandemic or not covered by Kurzarbeit, particularly women, youth, and elderly workers, to prevent widening inequality and deeper labor market scarring. The budget deficit is projected to narrow to 3.4 percent of GDP this year from 6.3 percent last year.


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IMF Sees France's Growth At 5.5% This Year

Trading 19 Jan 2021 Commentaire »

The International Monetary Fund projected France's economic growth at 5.5 percent for this year, after an estimated 9.0 percent slump in 2020, a year ravaged by the coronavirus pandemic. The medium-term output will remain below the pre-crisis trend as impaired balance sheets and higher unemployment weigh on activity, the IMF said in Article IV Consultation report, released on Tuesday. "Risks to the forecast are large and dominated by the virus dynamics," the lender added.

The unemployment rate is projected to climb to 10.4 percent this year from 8.7 percent last year. The budget deficit is forecast to narrow to 7.7 percent of GDP from 10.6 percent last year. The public debt is projected to rise to 117.6 percent of GDP from 115.3 percent.


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*IMF Projects Germany's 2021 GDP Growth At 3.5%; France's Growth At 5.5%

Trading 19 Jan 2021 Commentaire »

IMF Projects Germany's 2021 GDP Growth At 3.5%; France's Growth At 5.5%


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*Canadian Manufacturing Sales Decreased 0.6% In November

Trading 19 Jan 2021 Commentaire »

Canadian Manufacturing Sales Decreased 0.6% In November


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*Canadian Wholesale Sales Climb 0.7% In November

Trading 19 Jan 2021 Commentaire »

Canadian Wholesale Sales Climb 0.7% In November


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