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Overview of the EUR / USD pair. January 22. The euro is showing a willingness to return to 2.5-year highs. The ECB meeting turned



DATE OF PUBLICATION: 2021-01-22 03: 06: 434-hour timeframe Technical data: Major linear regression channel: direction – upward. Younger linear regression channel: direction – downward. Moving average (20; smoothed) – sideways. CCI: 105.3571 Currency the EUR / USD pair on Thursday, January 21, was waiting for the results of the meeting of the European Central Bank. And when they were announced, it turned out that there was nothing special to react to. But more on that below. From a technical point of view, the EUR / USD pair has consolidated above the moving average line, so the trend on the 4-hour timeframe has changed to an upward trend. So, what can we expect now? Copying the movement of the pound / dollar pair? Technically, everything now looks like this: there was a downward correction by almost 300 points within the upward trend. Therefore, now is the time to resume the uptrend. Of course, this is only a hypothesis so far, but given the continued weak demand for the American currency and the complete disregard for the fundamental background, this conclusion suggests itself. Let’s return to the ECB meeting and its results. Here, all the results can be described in one sentence: the regulator left the monetary policy parameters unchanged. Actually, none of the traders expected that the ECB at its first meeting in 2021 would change the rate or begin to further increase the quantitative easing program or its “emergency analogue” – the PEPP program. Thus, the rate on loans remained at 0%, on deposits – at -0.5%, and the volume of the PEPP (Pandemic Emergency Purchase Program) program – at 1.85 trillion euros. Perhaps there is nothing more to say here. The fact that traders reacted to this news by buying Euro currency has nothing to do with what is happening. Simply put, it was not the reaction of traders to the ECB meeting. Let’s figure it out: 90% of its time, almost any instrument moves either up or down. That is, the upward movement on January 21 may be a mere coincidence. The markets were going to buy the euro without the ECB meeting, that’s all. There was nothing to react to. The ECB has not made any changes to monetary policy, so you can forget about the meeting and focus on the problems of the Eurozone. Because there are many more of them now than, for example, in the American economy. The problem of high public debt in the United States is already something of a talk of the town. This problem has been discussed by all experts, economists, analysts for a couple of decades. However, along with this “unsolvable” problem, the American economy continues to grow and remains in first place in the world. Yes, some studies show that in 10 years or so, the Chinese economy may become the world’s largest economy. However, this is still written with a pitchfork on the water. Nobody knows what will happen in 10 years. Anyone could predict the “coronavirus”? Yes, new viruses and diseases appear on planet Earth from time to time, but who could predict that the whole world would be mired in a pandemic for a whole year? And this is not the end … Thus, we would recommend paying attention to indicators that reflect the state of the economy here and now. The Eurozone also has enough debts. They are not so huge, but they are. For example, the € 750 billion Eurozone recovery fund alone will be leveraged and will take decades to return. These are the same debts. But we look at the GDP forecasts for the fourth quarter and see: -2.2% is forecasted in the Eurozone; in the States it is forecasted + 4.2% – + 4.4%. Thus, despite all the problem, despite the first place in the world in the number of cases of coronavirus, despite the first place in the world in the number of deaths from COVID, despite the absence of a package of assistance to the economy, the unemployed and business, it is the American economy that continues to recover after the second quarter. 2020, while the European economy will contract again. Naturally, this is due to the second “lockdown”, which was in the EU, but not in the States. However, what is the difference for what reasons between economies there will be such an imbalance in the fourth quarter? The fact remains, but despite this, the European currency as a whole continues to grow. Finding any reasons for the strengthening of the euro and the fall of the US dollar is still very difficult. We have already spoken about the economy. There are no serious geopolitical problems now either in the EU or in the United States. Moreover, it was the European Union that recently lost a part of “its” territory (Great Britain). There is one less country in the European Union. And not just for one country, but for a country with an economy in the TOP-10 in the world. However, before Brexit and after Brexit, the European currency continued to rise. Political problems, crisis? Yes, he was in the States for almost the entire 2020. In Europe, there were other problems, but they were successfully resolved. But the European currency cannot grow for about 10 months just on the political crisis in the United States! Therefore, based on the above, we can conclude that the factors pushing the euro up and the dollar down do not lie, as they say, on the surface … First, it may be a speculative factor, which we have already mentioned. First, an uptrend started and it started quite rightly (four types of crises in the US in 2020, which even Joe Biden recently announced). And in recent months, traders, it turns out, simply by inertia buy euros and get rid of the dollar. The second hypothetical reason may lie in the plane of the big players. We have said more than once that small traders do not make any weather on the market. Markets are driven by big players. This, of course, is not one or two central banks. There are hundreds, thousands of them, but still not millions, like small players. And their volumes are different. And goals too. Thus, it is quite possible that in the highest circles they possess completely different information, inaccessible to ordinary traders. Based on this information, transactions for the sale of the dollar can be made. The third possible reason is purely technical. If you look at the monthly timeframe, you can see that the euro has been depreciating for 12 years. For a global trend – 10-12 years is the ideal time to end. Thus, now may be the time for a long-term uptrend for the euro (from 2000 to 2008, the euro rose in price), or it is time for a technical correction to the level of 1.4000. Of course, confirmation of these assumptions will be extremely difficult to obtain. Therefore, we, as before, recommend following the trend, and not trying to guess a reversal, especially a long-term one. It is better to settle for less profit than to lose everything. The volatility of the euro / dollar currency pair as of January 22 is 70 points and is characterized as “average”. Thus, we expect the pair to move between the levels of 1.2083 and 1.2223 today. A downward reversal of the Heiken Ashi indicator may signal a new round of downward correction. Nearest support levels: S1 – 1.2085S2 – 1.1963S3 – 1.1841 Closest resistance levels: R1 – 1.2207R2 – 1.2329R3 – 1.2451 Trading recommendations: EUR pair / USD consolidated above the moving average. Thus, today it is recommended to stay in long positions with targets at 1.2207 and 1.2223 until the Heiken Ashi indicator turns down. It is recommended to consider sell orders in case the pair consolidates back below the moving average, with the target of 1.2085. Recommended reading: GBP / USD pair overview. January 22. The pound sterling has renewed its 2.5-year highs and is not going to stop there. Trading signals, COT report: Forecast and trading signals for the EUR / USD pair for January 22. Forecast and trading signals for the GBP / USD pair for January 22. Material provided by InstaForex – www.instaforex.com Source – InstaForex

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