EUR/USD. Draghi is back in business, but it doesn’t make the euro any easier

Trading 03 Fév 2021 Commentaire »

The political crisis in Italy, the coronavirus mutation, the European "iron curtain" and the weak pace of economic recovery in the euro zone-all these fundamental factors are putting significant pressure on the single currency. In the context of the EUR/USD pair, such a gloomy fundamental background is compounded by the overall strengthening of the US currency: the US dollar index is still staying above the 91-point mark, reflecting increased investor interest. The greenback strengthens its position mainly due to two factors: 1) rising treasury yields (10-year Treasury yields hit a three-week high today; 2) general nervousness about the fate of America's Rescue Plan.

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The resonant bill, which is worth $1.9 trillion, has become the object of harsh criticism from Republicans. In their opinion, the country does not need such large-scale assistance, since, according to the calculations of the Congressional budget Committee, the American economy will return to pre-crisis levels in the second half of this year. Meanwhile, the nearly $2 trillion bill entails not only an increase in the national debt, but also an increase in some taxes (due to which budget holes will be patched). In the light of such reasoning, the Republicans proposed their own version of the bill, which is worth $618 billion.

Biden refused. Take note that at the moment, the Democrats need the support of Republican senators (at least ten of them): to adopt the fiscal aid package, the support of 60 congressmen of the upper house is needed, while the Democratic Party has only 51 votes... To get around this blockage, Democrats need to pass a budget resolution (which must be approved by the House and Senate) that activates a legislative instrument called "reconciliation." In this case, the American Rescue Plan can be approved in the Senate by a simple majority: 50 + 1.

Political negotiations around this issue continue: the process of agreeing on the nearly $2 trillion bill has clearly dragged on, despite the fact that Democrats de facto control both houses of Congress. This fact provides background support for the dollar, which is used by the market as a protective tool.

However, even if we ignore the dominance of the US currency, we can conclude that the EUR/USD pair is dominated by bearish sentiment. Italy is on the agenda again, where political passions are also raging. The country is on the verge of early parliamentary elections amid a government crisis.

Let me remind you that the prime minister lost his absolute majority in the Senate after his former ally – former Prime Minister Matteo Renzi - left the coalition. A stumbling block in the dispute between the parties was the issue of the distribution of funds allocated to the country from EU aid funds. The junior coalition partner withdrew from the political alliance and recalled its ministers. Giuseppe Conte received a vote of parliament, but was unable to form a new coalition. The Speaker of the Chamber of Deputies, Roberto Fico, was also unable to do this. Italian President Sergio Mattarella, who under the constitution is the only person authorized to call early elections, made a last-ditch attempt to avoid early elections: he suggested that former ECB head Mario Draghi "sew" a new coalition of disparate political groups in parliament and lead the government. At the same time, he warned that if this attempt fails, the country will go to early parliamentary elections.

Now the situation is hanging in the air, and the pendulum can swing both in one direction and in the other. For example, representatives of the Italian political force "5 Star Movement" have already stated that they will not support the government led by Draghi (they have their own "scores" with him, even since Mario headed the central bank). At the same time, it is currently unknown whether the other influential League party, Matteo Salvini, will support the technical government and whether in this case the Democratic Party will be able to enter into an alliance with its main political opponents.

In other words, at the moment there are more questions than answers, although the very fact of the appearance of Mario Draghi on the political horizon of Italy was enthusiastically received both in the economic and business circles of the country, and in Brussels. Meanwhile, the Italian president has already warned that Italy cannot afford to hold early elections at such a critical moment. If this scenario is implemented, the euro will be under the strongest pressure. Even now, when the intrigue in this matter persists. The Italian factor weighs on EUR/USD.

In general, the current news flow does not contribute to the euro's recovery. In particular, yesterday it became known that the European Union has almost completely closed entry from most countries – including from the UK. According to media reports, now only citizens of states with "minimal morbidity statistics"can enter the EU. Also, these states must be "clean" of COVID mutations: there should be no cases of infection with new strains – South African, British or Brazilian.

In addition, it became known that the British strain is showing new genetic changes. According to preliminary estimates of scientists, this mutation could make existing vaccines "less effective".

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Thus, the current fundamental background is not conducive to the recovery of the EUR/USD pair. On the other hand, the price is near a strong support level of 1.2000 (lower line of the Bollinger Bands indicator on the daily chart). If the bears push through this target, they will open their way to the lower border of the Kumo cloud at D1, that is, to the 1.1930 level. But in case the dollar weakens (in the event of a decline in anti-risk sentiment), the bears will loosen their grip and will not be able to overcome this support level. Considering all of the above, we can consider selling " for a short distance", to the 1.2000 level. If sellers manage to move below this level, the main target for the downward momentum will be 1.1930.

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Analytics and trading signals for beginners. How to trade GBP/USD on February 4? Analysis of Wednesday. Getting ready for

Trading 03 Fév 2021 Commentaire »

Hourly chart of the GBP/USD pair

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The GBP/USD pair traded in different directions all day. On higher timeframes, we call it a "swing" movement: when the price is constantly jumping from side to side, but at the same time it can keep the trend. Such movements are extremely inconvenient to work out, since the indicators constantly react to them with reversals. This is exactly what happened today. Not only that, the pound/dollar pair passed only 60 points for the whole day, which is very little, since there was also a gap in the middle of the day. This is an absolutely unprecedented phenomenon, absolutely not typical for the foreign exchange market. The "gap" is the gap between quotes. This is normal in a stock market that does not operate 24/7. Gaps connect trading sessions. In the foreign exchange market, the gap can only be seen between Friday and Monday. But not in the middle of a working day! Today we saw this. A sell signal was also formed during the day, but thanks to the same gap and swing, it turned out to be false and led to losses. Thank God it was small, no more than 10 points. Therefore, it is not the most favorable day for trading, but it could be worse. In general, there is no trend now. The pair continues to trade between the 1.3610 and 1.3744 levels. So now we have a flat. It is always inconvenient to trade in a flat, so beginners can stay outside the market for some time and wait for a new trend to form.

The UK Services PMI was released on Wednesday, which remained extremely low and was not interesting. And in America, in addition to the ISM index, which we talked about in the euro/dollar article, the ADP also released an important report regarding the change in the number of employees in the US private sector. It is considered to be quite important and its value significantly exceeded forecasts. +174,000 workers instead of the predicted +47,000. But both of the most important pairs ignored it too.

The UK will host the main event of this week and possibly this year (for the pound). The Bank of England meeting, during which the markets will try to understand whether the central bank intends to reduce the key rate in the negative area in the coming months. If such hints are received or the Governor of the Bank of England, Andrew Bailey, directly states this, then the pound may finally surpass the 1.3610 level and continue to fall. Otherwise, the pair's quotes are likely to remain in a horizontal channel.

Possible scenarios on February 4:

1) Long positions are no longer relevant, since the price has broken the upward trend line. So now you need to wait for the upward trend to resume in order to be able to trade bullish again. The most interesting thing is that there is no downward movement right now either. By and large, the pound/dollar pair is flat.

2) Short positions are more relevant at the moment. However, the price cannot overcome the 1.3610 level in any way, so there is a high probability of returning to the 1.3744 level. We still recommend considering short positions, but you need the MACD indicator to discharge to zero and turn down. So far, the target is 1.3610. If the price settles below the 1.3610 level, it can also serve as a signal to sell with 1.3561 as the target.

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 4? Analysis of Wednesday. Getting ready for

Trading 03 Fév 2021 Commentaire »

Hourly chart of the EUR/USD pair

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The EUR/USD pair corrected minimally to the support area of 1.2047 and resumed the downward movement on Wednesday, having reached the support level of 1.2007 by the end of the day. As you might guess, from the high to the low of the day, the pair passed around 40 points, which is very little even for it. Not a single trading signal was generated during the day. The MACD indicator turned down, however, it did not discharge to the zero level beforehand. The trend line remained in effect, but the price did not retrace it and did not bounce off it. Thus, following yesterday's recommendations, novice traders should not have opened either short or long positions today. In general, the downward trend remains in effect, however, the price is located very close to the trend line, therefore, it may settle above it by Thursday, which will change the current trend to an upward one. In this case, beginners can consider long positions. Rebounding from the trend line can provoke another round of the downward trend.

The macroeconomic background was very, very interesting on Wednesday. The European Union published a report on business activity in the service sector for January, but since it did not change much compared to December, there was no reaction to it. But the inflation report for January unexpectedly turned out to be much stronger than forecasted and amounted to + 0.9% y/y, although the previous value was -0.3%. However, the euro was unable to extract any dividends for itself from this report. An important index of business activity in the US service sector ISM was also published, which also exceeded the forecasted values, but traders did not pay much attention to it. Thus, we conclude that traders are simply ignoring macroeconomic publications again, so technical factors remain in the first place in terms of importance.

Only minor reports will be published in the European Union and the United States on Thursday. And if today the markets ignored important data, then there is no hope that they will pay attention to tomorrow's report on retail sales in Europe or the number of new claims for unemployment benefits in the United States. Most likely, this data will also be ignored. Thus, everything will depend on the trend line and technical factors in general. This somewhat facilitates the process of trading the EUR/USD pair.

Possible scenarios on February 4:

1) Long positions are currently irrelevant, since the price is below the trend line. Thus, you are advised to consider new long positions on the pair if the price settles above the downward trend line with targets at resistance levels 1.2083 and 1.2123.

2) Trading for a fall remains relevant at the moment. However, we recommend trading bearish only after the next round of correction, the MACD indicator is discharged to zero and a new and strong sell signal is formed. Or if the price bounces off the trend line. The targets are 1.2007 and 1.1971.

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

U.S. Services Index Unexpectedly Reaches Nearly Two-Year High In January

Trading 03 Fév 2021 Commentaire »

A report released by the Institute for Supply Management on Wednesday showed U.S. service sector activity unexpectedly grew at an accelerated rate in the month of January.

The ISM said its services PMI inched up to 58.7 in January from a revised 57.7 in December, with a reading above 50 indicating growth in the service sector.

The uptick came as surprise to economists, who had expected the index to edge down to 56.8 from the 57.2 originally reported for the previous month.

With the unexpected monthly increase, the services PMI reached its highest level since hitting 58.8 in February of 2019.

"Services sector activity firmed at the start of 2021 despite the raging pandemic and stricter virus containment measures," said Oren Klachkin, Lead U.S. Economist at Oxford Economics.

The increase by the headline index was partly due to a significant acceleration in the pace of growth in new orders, as the new orders index jumped to 61.8 in January from 58.6 in December.

The employment index also surged up to 55.2 in January from 48.7 in December, indicating job growth in the service sector following a one-month contraction.

On the other hand, the report said the business activity index slipped to 59.9 in January from 60.5 in December, although the reading above 50 still indicates the eighth straight month of growth.

The ISM said the prices index also edged down to 64.2 in January from 64.4 in December, pointing to a slight slowdown in the pace of price growth.

"The stage is set for a strong rebound in the services sector heading into the summer," said Klachkin. "The recent drop in new case rates is encouraging and portends an improving health situation, particularly with inoculations set to ramp up."

He added, "Improving health dynamics will allow deeply impacted services sector businesses to gradually reopen, accelerating the recovery that will also receive a booster shot from stimulus provided by the American Rescue Plan."

Earlier this week, the ISM released a separate report showing a bigger than expected slowdown in the pace of growth in U.S. manufacturing activity in January.

The ISM said its manufacturing PMI declined to 58.7 in January from a downwardly revised 60.5 in December, while economists had expected the index to show a more modest drop to 60.0.


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

*U.S. Crude Oil Inventories Dip By 1.0 Million Barrels In Week Ended 1/29

Trading 03 Fév 2021 Commentaire »

U.S. Crude Oil Inventories Dip By 1.0 Million Barrels In Week Ended 1/29


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

Dollar Strengthens On Rising U.S. Treasury Yields

Trading 03 Fév 2021 Commentaire »

The U.S. dollar was higher against its key counterparts in the European session on Wednesday, as the U.S. treasury yields advanced after Senate Democrats voted to push through the Covid-19 rescue package without any Republican support.

The Senate voted 50-49 to begin the budget reconciliation process on Tuesday.

The move enables the Democrats to pass coronavirus relief legislation without any Republican votes.

The prospect for fiscal stimulus triggered a selloff in U.S. Treasuries, lifting the yields.

Investors cheered news that former European Central Bank chief Mario Draghi has been asked to form a technocratic government to solve the ongoing political crisis in Italy.

Prime Minister Giuseppe Conte resigned on January 26 after Italia Viva party withdrew its support from the coalition government.

Data from the payroll processor ADP showed that U.S. private sector employment increased much more than expected in January.

ADP said private sector employment jumped by 174,000 jobs in January after decreasing by a revised 78,000 jobs in December.

Economists had expected employment to rise by 49,000 jobs compared to the loss of 123,000 jobs originally reported for the previous month.

The currency held steady against its major rivals in the Asian session, with the exception of the pound.

The greenback rose to 0.9001 against the franc, its strongest since December 2. At yesterday's trading close, the pair was quoted at 0.8972. The greenback may possibly challenge resistance around the 0.92 level.

The greenback climbed to more than a 2-month high of 1.2005 against the euro, compared to Tuesday's closing value of 1.2043. The greenback is likely to test resistance around the 1.18 level.

Flash data from Eurostat showed that Eurozone consumer prices increased for the first time in six months in January.

The harmonized index of consumer prices climbed 0.9 percent year-on-year in January, reversing a 0.3 percent fall in December. Economists had forecast an annual growth of 0.5 percent.

The greenback reversed from an early low of 1.3683 against the pound, rising to 1.3619. The pound-greenback pair had ended yesterday's trading session at 1.3667. The greenback is seen finding resistance around the 1.35 mark.

Final survey results from IHS Markit showed that the UK service sector contracted at the fastest pace in eight months in January due to the impact of restrictions related to the Covid-19 pandemic on trade and temporary business closures amid the third national lockdown.

The Markit/Chartered Institute of Procurement & Supply services Purchasing Managers' Index plunged to 41.2 from 50.4 in December. A score below 50 indicates contraction. The flash score was 40.6.

The greenback bounced off to 1.2811 against the loonie and 0.7191 against the kiwi, from its prior 2-day low of 1.2763 and a 5-day low of 0.7226, respectively. The next possible resistance for the greenback is seen around 1.34 against the loonie and 0.70 against the kiwi.

In contrast, the greenback held steady against the aussie, after having retreated to 0.7624 earlier in the session. The greenback was worth 0.7607 per aussie at Tuesday's New York session close.

The U.S. currency ticked up to 105.10 against the yen and held steady thereafter. The pair had closed Tuesday's deals at 104.95.

The U.S. ISM non-manufacturing PMI for January will be released at 10:00 am ET.


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

*ISM U.S. Services PMI Inches Up To 58.7 In January

Trading 03 Fév 2021 Commentaire »

ISM U.S. Services PMI Inches Up To 58.7 In January


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

Iceland Holds Key Interest Rate Steady

Trading 03 Fév 2021 Commentaire »

Iceland's central bank left its key interest rate unchanged on Wednesday as policymakers assessed that the economic performance is set to be better than projected. The Monetary Policy Committee decided to keep the rate on seven-day term deposits unchanged at 0.75 percent, the Central Bank of Iceland said in a statement. The latest decision to hold the rate steady came after a quarter-point reduction in November. Policymakers assessed the economic contraction in 2020 to be smaller than the forecast in November as domestic demand was likely stronger, the bank said in its latest monetary bulletin.

The forecast for this year is also for domestic demand to grow more than previously projected, whereas the outlook for exports has deteriorated, the bank said. Economic developments will be affected by the path the coronavirus pandemic takes, the bank added.

The bank projected 3.9 percent inflation in the first quarter of this year. Price growth is then seen easing fast throughout the year. "...there is still a sizeable slack in the economy and the krona has appreciated in recent months," the bank said.


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Treasury Reveals Details Of Long-Term Securities Auctions

Trading 03 Fév 2021 Commentaire »

Wednesday morning, the Treasury Department announced the details of this month's auctions of three-year and ten-year notes and thirty-year bonds.

The Treasury said it plans to sell $58 billion worth of three-year notes, $41 billion worth of ten-year notes and $27 billion worth of thirty-year bonds.

The results of the three-year note auction will be announced next Tuesday, the results of the ten-year note auction will be announced next Wednesday and the results of the thirty-year bond auction will be announced next Thursday.

Last month, the Treasury sold $58 billion worth of three-year notes, $38 billion worth of ten-year notes and $24 billion worth of thirty-year bonds. All three auctions attracted above average demand.


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

U.S. Private Sector Employment Rebounds Much More Than Expected In January

Trading 03 Fév 2021 Commentaire »

Private sector employment in the U.S. increased by much more than expected in the month of January, according to a report released by payroll processor ADP on Wednesday.

ADP said private sector employment jumped by 174,000 jobs in January after decreasing by a revised 78,000 jobs in December.

Economists had expected employment to rise by 49,000 jobs compared to the loss of 123,000 jobs originally reported for the previous month.

"The labor market continues its slow recovery amid COVID-19 headwinds," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

The report said employment in the service-providing sector increased by 156,000 jobs, reflecting notable job growth in healthcare/social assistance, leisure/hospitality and professional/business services.

Employment in the goods-producing sector also rose by 19,000 jobs during the month, reflecting an uptick in construction jobs.

ADP also said employment at mid-sized business climbed by 84,000 jobs, while small businesses added 51,000 jobs and employment at large businesses edged up by 39,000 jobs.

"Although job losses were previously concentrated among small and midsized businesses, we are now seeing signs of the prolonged impact of the pandemic on large companies as well," said Yildirmaz.

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs.

Economists currently expect employment to rise by 50,000 jobs in January after falling by 140,000 jobs in December. The unemployment rate is expected to hold at 8.7 percent.


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