EUR/USD. Trapped sideways: euro to face an important test

Trading 01 Fév 2021 Commentaire »

The euro-dollar pair held captive of the 100-point price range, within which it has been trading for two weeks. Buyers of EUR/USD cannot approach the borders of the 22nd figure, while the bears do not dare to break the support level of 1.2050. As a result, the pair fluctuates within the 1.2050-1.2160 price range. At the same time, it cannot be said that the pair does not demonstrate volatility - on the contrary, the price movement is impulsive - in a few hours the pair can gain about 50-70 points and lose the same amount by the end of the trading session.

But all these price fluctuations are of a meaningless nature, since traders have been unable to determine the EUR/USD movement vector for several weeks. Indeed, despite the impulsivity, the pair is marking time in the notorious sideways movement. Take a look at the daily or weekly charts - any attack from the bears attracts bulls. And vice versa - any more or less impressive growth is used by traders as an excuse to open short positions. Both opposing sides are sensitive to the current news flow, but at the same time they are waiting for a powerful information driver that would snatch the pair out of the flat.

analytics6018355fa7689.jpg

For example, on Monday morning, EUR/USD traders reacted negatively to the German data. The volume of retail sales in Germany in December decreased by 9.6% (on a monthly basis). This is the weakest result in the last 65 years: the last time the indicator was released at such a low level was in 1956. In annual terms, the indicator also came out in the red zone, slowing to 1.5% (the worst result since April 2020). Such a disappointing release was a cold shower after the strong inflation data that was published in Germany last week. The coronavirus crisis has re-emerged, putting significant pressure on the single currency.

Reacting to the above release, the EUR/USD bears were able to reduce the price by 60 points – to a 5-day low of 1.2069. However, at this point, the downward momentum deflated: buyers once again became more active at the lower border of the price range. The bears tried to take revenge at the beginning of the US session on Monday, but the US ISM manufacturing index, which came out in the red zone, did not allow dollar bulls to show character. As a result, the EUR/USD pair was stuck on the border of 20 and 21 figures again.

Take note that this kind of "push-pull" is due to conflicting fundamental factors - both for the dollar and the euro. The dollar has recently been sensitive to the US stock market, which also demonstrates increased volatility against the backdrop of the corporate reporting season. Last week there was a certain (inverse) correlation: as soon as the major indices swooped down, the dollar was in high demand. And vice versa - as soon as the mood in the stock market improved, the greenback fell under a wave of sales.

The euro, in turn, is subject to pressure from the European Central Bank. Several representatives of the ECB admitted the option of lowering the interest rate on deposits (in particular, Klaas Knot and Martins Kazaks). Fuel was added to the fire by the resonant Bloomberg report that "the markets underestimate the chances of the ECB rate cuts". These messages did not allow EUR/USD bulls to develop the growth trend and settle in the area of the 22nd figure. Nevertheless, the issue of reducing the rate can be considered speculative: there is a lot of talk about it, but none of the influential members of the ECB has yet to support this idea: neither ECB President Christine Lagarde, nor her deputy, nor the chief economist of the ECB, nor the head of the Bundesbank. Moreover, the slightest hints of an improvement in the situation in the eurozone economy are assessed by the market through the prism of the likelihood of a rate cut.

For example, as mentioned above, last week German inflation surprised with rather strong numbers, which became a harbinger of an increase in European inflation. Thus, in monthly terms, the general consumer price index continued its upward trend in January, having risen to 0.8% (against the forecast of growth to 0.4%). A positive trend was also recorded on an annualized basis: the index came out of the negative area and reached 1.0% with the forecast of growth to 0.7%. In response to this release, the EUR/USD pair impulsively jumped and almost reached the middle of the 21st figure. But then the dollar strengthened its position amid fluctuations in the stock market, which is why the sharp attack on growth once again broke down.

On Tuesday, buyers of EUR/USD will have an opportunity to prove themselves again - if the latest macroeconomic reports end up in the green zone. Data on the growth of the European economy in the fourth quarter will be released. The overall forecast is that GDP will contract by 1.4% q/q after a record rise to 12.5%. On an annualized basis, a 6 percent decline is expected, following a 4.3 percent decline in the third quarter.

analytics601835547ddd0.jpg

Recall that the GDP growth rates of Germany, France and Spain that were published last week turned out to be better than expected, despite weak analysts' forecasts. In particular, the German data on GDP for the 4th quarter reflected an increase of 0.1% q/q (with the forecast of a decline to -0.2%). Spain's GDP marginally increased (by 0.4%), while experts were confident in negative dynamics (down to -1.5% q/q). The French indicators nevertheless went into negative territory, but even here the most pessimistic forecasts did not come true: instead of falling to -4% q/q, the indicator fell to -1.3%.

Considering these local results, we can assume that the upcoming release will also be released in the green zone, thereby supporting the euro. Otherwise, market speculation about the ECB's interest rate cut will again be on the agenda.

From a technical point of view, the pair is currently in the area of the lower border of the above price range of 1.2050-1.2160. If, when approaching the support level of 1.2050, the downward momentum fades (which is most likely, given the two-week "bumpiness" in the range), you can consider long positions while initially aiming for 1.2100 (the middle line of the Bollinger Bands on H4) and the main target at 1.2160 (middle line of Bollinger Bands on D1).

The material has been provided by InstaForex Company - www.instaforex.com

EUR/USD: dollar on the march, while the market figures out what will happen with the greenback

Trading 01 Fév 2021 Commentaire »

analytics60182127846a0.jpg

The USD index stabilized in January. The greenback has predominantly been sideways in recent weeks after rebounding from a nearly three-year low (around 89.2 points) earlier in the year. Traders are now trying to figure out if the sell-off of the US currency will continue, which took place in 2020 and was caused by expectations of a global economic recovery after the pandemic, amid huge budget spending in the United States and the continued super-soft monetary policy of the Fed.

The USD index stabilized in January. In recent weeks, the greenback has mostly traded in a sideways range after rebounding from an almost three-year low (around 89.2 points) at the beginning of the year.

Traders are now trying to understand whether the dollar's sell-off will continue, which took place in 2020 and was caused by expectations of economic recovery after the pandemic amid a huge budget expenditures in the United States and continued ultra-loose monetary policy of the Federal Reserve.

"The USD downtrend is currently suspended, but what will happen to the dollar in the future, from one week to a month, probably depends on the risk appetite of investors," National Australia Bank strategists say.

Last week, the greenback strengthened by about 0.5% on the back of a sharp decline in key US stock indexes, provoked by the excitement around GameStop. At the same time, the Dow Jones and S&P 500 indicators suffered the highest losses in a month since October.

Although on Monday, the Dow Jones futures returned to the area above 30,000 points, and the S&P 500 - above 3,700 points, nonetheless, both indexes remain under the 50-day moving average, which is fraught with risks of breaking the short-term upward trend of recent months.

"We need to see where the stock stabilizes, and whether it will be a short-term surge in the stock market or it will cause a further downturn," Barclays said.

The greenback started the new week on a high note, updating local peaks near 90.9 points.

The positive trend in the USD is supported by investor concerns about the adoption of another fiscal stimulus package in the United States and the potential impact of the slow pace of vaccination against COVID-19 on global growth prospects.

A group of Republican senators invited US President Joe Biden, who previously presented a $1.9 trillion stimulus program, to discuss an alternative package of measures to support the national economy in the amount of $600 billion.

Biden has invited senators to the White House for a full exchange of views on the stimulus program, the White House press office said Sunday.

analytics601822e47856e.jpg

The euro was fairly steady against the US dollar, even amid a sell-off in US stocks.

The single currency was supported by the fact that Germany and Spain managed to avoid an economic downturn in the fourth quarter, while the French economy did not slow down as much as analysts expected.

The EUR/USD pair closed Friday's trading with a slight increase, around 1.2135.

The euro started the new week on the defensive against the US dollar following two sessions of growth.

The EUR/USD pair sank to local lows around 1.2070 on Monday.

The euro was under pressure after the release of disappointing statistics for Germany, where retail sales in December fell by 9.6% on a monthly basis, although previously expected a decline of only 2.6%.

Despite the current downturn, the EUR/USD pair continues to trade within the range that has been prevalent since mid-January.

The evolution of the pandemic, vaccination against COVID-19 and the upcoming debate on the US stimulus package, due to end later this week, act as the main short-term drivers for the EUR/USD pair.

"The main currency pair should close below 1.2050 to make us expect a steady decline. The chances of such a scenario will increase if the pair does not advance above 1.2180 in the next few days. The next strong support for EUR/USD is located at 1.2000 ", - noted the experts of UOB.

The material has been provided by InstaForex Company - www.instaforex.com

Analytics and trading signals for beginners. How to trade GBP/USD on February 2? Analysis of Monday. Getting ready for Tuesday

Trading 01 Fév 2021 Commentaire »

Hourly chart of the GBP/USD pair

analytics601854e548259.jpg

The GBP/USD pair rebounded off the 1.3744 level once again on Monday, which is the current local high, and at the same time the peak of the current month and year. The pound/dollar pair has already rebounded from this level 5 times in total, and at the same time it is supported from below by an upward trend line, from which the pair has also rebounded three times over the past few days. The price perfectly bounced from the 1.3744 level and reached the trend line. However, we would not recommend novice traders to trade between these lines. In the previous article, we advised you to only trade up if the price settles above the 1.3744 level (which did not happen), as well as trade down if the price settles below the upward trend line, which also did not happen. Therefore, not a single signal was generated that could be worked out. But at the same time, the price cannot constantly stay between the trend line and the 1.3744 level. As we mentioned earlier, in the coming days the pair may settle above or below this triangle, which will allow us to draw a conclusion about the pair's succeeding direction.

The UK published a manufacturing PMI that slightly exceeded forecasts. And so the pound had more reasons to overcome the 1.3744 level, but instead it was facing a downward movement. We conclude that technical factors are more important right now. But in fairness, take note that today's reports were rather weak. Most embarrassing is that the pair is still ignoring the fundamental background. Even the euro/dollar pair is correcting in January 2021, while the pound is still not.

No major publications scheduled in the UK or the US on Tuesday. Traders also ignore the external fundamental background, so news and reports will not have any impact on the course of trading tomorrow. Therefore, it will be necessary to consider technical signals exclusively. These are rebounds from important support/resistance levels, trend lines, reversals of the MACD indicator.

Possible scenarios on February 2:

1) Long positions remain relevant since the price is still above the trend line. Thus, novice traders are advised to monitor the formation of buy signals. If the price surpasses the 1.3744 level, it will be a buy signal with the 1.3795 resistance level as the target. Also, the pair may rebound off the trend line again, which can also be regarded as a buy signal, but only with the 1.3744 level as the target.

2) You are advised to not consider short positions right now, as the upward trend is maintained for the GBP/USD pair. Thus, you can only open short positions when the price has finally settled below the rising trend line. The targets in this case can be located near support levels 1.3653 and 1.3607.

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 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.

Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.

The material has been provided by InstaForex Company - www.instaforex.com

Analytics and trading signals for beginners. How to trade EUR/USD on February 2? Analysis of Monday. Getting ready for Tuesday

Trading 01 Fév 2021 Commentaire »

Hourly chart of the EUR/USD pair

analytics60183f0800c52.jpg

The EUR/USD pair began a new round of downward movement on Monday, which made it possible to settle below the rising channel. Thus, the upward trend is canceled, and a new downward trend is formed instead. Based on this, you are advised to trade for a fall in the near future, but the 1.2059 level is very close to the price, from which the price has already rebounded twice. The third may also bounce. If that happens, the succeeding downward movement will be called into question. In yesterday's evening review, we advised you to open long positions if a new buy signal from the MACD indicator is generated. However, the MACD indicator did not turn to the upside during the day, therefore, there was no need to open longs. But beginners could well trade for a fall. Unfortunately, the sell signal was not the strongest, since at the close of the candlestick, where the price left the rising channel, the price had already gone down 40 points. With an average daily volatility of the EUR/USD pair of 60-70 points, novice traders could expect the pair to fall by another 20-30 points. However, despite the weakness of the signal, those traders who opened sell positions are now in profit by around 20 points.

The fundamental background was rather weak on Monday. Reports on business activity in manufacturing were published in the European Union and the United States, and the unemployment rate was also released in the EU. But one could immediately tell that these reports did not disappoint neither the buyers of the euro, nor the buyers of the dollar. Thus, we believe that today's rise in the US dollar (= fall in the euro/dollar pair) has purely technical reasons. And the PMIs themselves are not the strongest reports, and the unemployment rate has not changed from the previous month.

The eurozone GDP in the fourth quarter will be released on Tuesday. According to forecasts, GDP should decrease by 1-2%. Of course, the fall in GDP is due to the winter lockdown in the European Union. But the reasons are not important to us. The potential reaction of the markets is important. We believe that if this indicator declines by less than 1%, it could cause the dollar to rise. Otherwise, the chances of overcoming the 1.2059 level will increase.

Possible scenarios on February 2:

1) Long positions have lost their relevance at the moment, since the price left the second rising channel. So now you can only consider long positions on the pair if the current downward trend is canceled or a new upward trend (trend line or channel) is formed. At least this development is not expected until Tuesday morning.

2) Trading for a fall has become relevant at the moment. However, the price is supported by the 1.2059 level from below, through which it will be very difficult to pass. If the price settles below it, it will increase the chances of growth for the US dollar. But we recommend waiting for the price to pullback to the upside, the end of the correction, a sell signal to form from the MACD indicator, which must be discharged to the zero level. And only after that, should you consider the possibility of opening new short positions.

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.

The material has been provided by InstaForex Company - www.instaforex.com

Latvia Economy Shrinks For Second Consecutive Quarter

Trading 01 Fév 2021 Commentaire »

Latvia's economy contracted for a fourth consecutive quarter in the final three months of 2020, mainly due to the severe impact of the coronavirus pandemic throughout the year, preliminary data from the statistical office showed on Monday.

Gross domestic product decreased a non-adjusted 1.4 percent year-on-year after a 2.6 percent slump in the third quarter. The economy had contracted 1.0 percent and 8.9 percent in the first and second quarters, respectively.

On a seasonally and calendar-adjusted basis, GDP fell 1.7 percent year-on-year following a 2.6 percent drop in the previous quarter.

The economy grew a seasonally and calendar adjusted 1.1 percent from the third quarter, when it expanded 7.1 percent. In the first quarter, GDP fell 2.3 percent and output decreased 7.1 percent in the second quarter.

Detailed data for the fourth quarter as well as full year growth is set to be released on February 26.


The material has been provided by InstaForex Company - www.instaforex.com

Swedish Economy Grows In Q4

Trading 01 Fév 2021 Commentaire »

Sweden's economy grew less than expected in the final three months of 2019 and shrank for the whole year as the coronavirus pandemic impacted activity severely, preliminary data from Statistics Sweden showed on Monday.

Gross domestic product rose a seasonally adjusted 0.5 percent from the third quarter, when the economy grew a revised 4.3 percent. Economists had forecast 0.7 percent growth. The economy expanded for a second consecutive quarter.

The latest upturn implies that in the second half of the year, the economy recovered 63 percent of the large decline from the second quarter, Statistics Sweden said. Compared to the same quarter a year ago, the economy shrunk 2.6 percent in the fourth quarter after a 2.5 percent contraction in the previous three months. Economists had expected a 2.3 percent fall. The Swedish economy contracted 2.8 percent in the year 2020.


The material has been provided by InstaForex Company - www.instaforex.com

U.S. Construction Spending Jumps Slightly More Than Expected In December

Trading 01 Fév 2021 Commentaire »

Partly reflecting a spike in spending on residential construction, the Commerce Department released a report on Monday showing U.S. construction spending increased by slightly more than expected in the month of December.

The Commerce Department said construction spending jumped by 1.0 percent to an annual rate of $1.490 trillion in December after surging up by 1.1 percent to a rate of $1.476 billion in November. Economists had expected construction spending to climb by 0.9 percent.

Spending on private construction increased by 1.2 percent to a rate of $1.138 trillion, as a 3.1 percent spike in spending on residential construction more than offset a 1.7 percent slump in spending on non-residential construction.

The report said spending on public construction also rose by 0.5 percent to a rate of $352.8 billion, with spending on educational construction and highway construction climbing by 0.6 percent and 0.9 percent, respectively.

The Commerce Department said the value of construction in 2020 was $1.430 trillion, 4.7 percent above the $1.365 trillion spent in 2019.

"We look for a gradual recovery in private, nonresidential investment as the recovery takes hold, while we expect the pace of housing starts to moderate slightly," said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

She added, "Public outlays will likely continue to be constrained by tight state and local budgets despite a better than expected performance for revenues during the pandemic."


The material has been provided by InstaForex Company - www.instaforex.com

Ichimoku cloud indicator analysis of ETH/USD

Trading 01 Fév 2021 Commentaire »

ETH/USD according to the Ichimoku cloud indicator remains in a bullish trend. We use the Ichimoku cloud indicator in order to identify key support levels that if broken could signal more weakness and a possible pull back to come, taking into account the bearish divergence we noted in our previous analysis.

analytics601855c03757a.jpg

In the 4 hour chart trend remains bullish. Not strong bullish but bullish. Price is above the Kumo (cloud). Support by the cloud is at $1,310-$1,263. Breaking below the Kumo will be a bearish sign that would imply more downside. The downside target will be seen in the Daily chart below. In the 4 hour chart the tenkan-sen (red line indicator) has crossed below the kijun-sen (yellow line indicator) and this is not a good sign. Bulls want to see the tenkan-sen cross above the kijun-sen again in order to get a bullish signal.

analytics601856440fffe.jpg

In the Daily chart price is trading below the tenkan-sen. This is an initial weakness sign. Where can this lead to? If in the 4 hour chart we see the cloud break, then in the Daily chart we will expect price to challenge the kijun-sen at $1,200. If $1,200 fails to hold then we should expect price to test the Kumo around $1,000. Until then there are lots of support levels that need to be broken. But we need to keep an eye on the bigger picture if support levels start breaking. On the other hand if price breaks above $1,390 we should not be surprised if we see a new all time high towards $1,500.The material has been provided by InstaForex Company - www.instaforex.com

U.S. Manufacturing Index Drops More Than Expected In January

Trading 01 Fév 2021 Commentaire »

Manufacturing activity in the U.S. saw continued growth in the month of January, according to a report released by the Institute for Supply Management on Monday, although the pace of growth slowed more than expected.

The ISM said its manufacturing PMI declined to 58.7 in January from a downwardly revised 60.5 in December.

While a reading above 50 indicates continued growth in the manufacturing sector, economists had expected the index to show a more modest drop to 60.0.

The bigger than expected decrease by the headline index came as the new orders index slid to 61.1 in January from 67.5 in December and the production index fell to 60.7 from 64.7.

On the other hand, the report said the employment index inched up to 52.6 in January from 51.7 in December, indicating slightly faster job growth in the manufacturing sector.

The prices index also jumped to 82.1 in January from 77.6 in December, pointing to a faster price of price growth during the month.

"Manufacturing sector prospects for 2021 are upbeat, with solid consumer goods demand, inventory restocking, gradual business reopenings, and additional federal pandemic relief all set to keep activity on a firm footing," said Oren Klachkin, Lead U.S. Economist at Oxford Economics.

He added, "We expect manufacturing momentum to start cooling around mid-year as vaccine distribution unlocks badly-damaged services activities while concurrently quelling consumer goods demand."

The ISM is scheduled to release a separate report on Wednesday on activity in the service sector in the month of January. The services PMI is expected to dip to 56.8 in January from 57.7 in December.


The material has been provided by InstaForex Company - www.instaforex.com

USDJPY continues upwards

Trading 01 Fév 2021 Commentaire »

USDJPY has broken the bearish channel it was in for the last few months and as we noted in our previous analysis trend is now changing to bullish and we expect price to reach 106 soon. Price has already reached 105 and we continue to expect to see more Dollar strength this week.

analytics601852e5b0719.jpg

Red lines - bearish channel (broken)

The RSI has still not reached overbought levels. Price is clearly breaking out the bearish channel and we at least expect a partial retracement of the entire downward move that started back in March 2020 when price was at 111. Our 106 target is just the 38% Fibonacci retracement of the entire decline. Strong resistance is found in that level and bulls should not get overconfident when and if we reach that price. For now trend is bullish and there is no sign of reversal.

The material has been provided by InstaForex Company - www.instaforex.com