EUR/USD. Overview for January 17. Speeches by Lagarde and other members of the Fed may provide guidance to traders this week.
January 17, 2023 2:20 pm
On Monday, the EUR/USD currency pair continued to rise, but it was unable to surpass the Murray level of “+1/8”-1.0864. As a result, a new round of mild correction has started, which so far hasn’t shown any signs of growing into the scale correction we’re hoping for. We can say that the Monday auction was quiet, tranquil, and pleasant. Given that the macroeconomic and fundamental background will be stable and quiet, the entire current week is not expected to be particularly active. However, it should be remembered that there will still be several significant events that have the potential to cause significant changes in the euro/dollar pair. Due to the substantial decline in market expectations following the release of the US inflation report, we believe that great attention should be paid to the comments made by Fed officials. The monetary committee members will now have to justify whether this report will result in a further slowdown in the pace of tightening monetary policy or whether the Fed won’t give up the “hard” monetary approach in advance. In any case, the dollar might finally become more popular among traders if the Fed members’ rhetoric is “hawkish” and includes suggestions of a 0.5% hike, as it is obvious that it has not been successful in previous weeks. The dollar might decline even further if there are indications of a 0.25 percent increase.
Nothing changed on Monday in terms of technology. The euro remains close to its regional highs and is above all of the Ichimoku indicator’s lines on the 24-hour TF. As a result, there are now no good reasons to sell the pair. By the way, we don’t even consider that a strong fundamental background in favor of the dollar should come before the pair’s decline starts. The pair may suddenly begin traveling in the opposite direction, as it frequently does. If we assume that the market is now anticipating a bold hike from the ECB and a gradual increase from the Fed, then this factor will eventually stop having an impact. Based on that, the pair won’t continue to expand eternally.
In the upcoming three months, the ECB is not likely to alter its approach.
The rate of inflation in Europe will be crucial in the near future. Recall that the US dollar started to decline at about the time when the country’s inflation started to decrease. The slide persisted as the Fed signaled that it was prepared to begin easing off on the pace of tightening monetary policy. The euro currency will eventually suffer the same fate. The ECB may start to provide hints that it is prepared to shift to 0.25% rate hikes if inflation suddenly starts to slow down dramatically and will do so for several months in a row. And for the market, this might be a clear indication to sell the euro. This week will see the release of the second December inflation estimate. Although traders are well aware of it, a further decline in the consumer price index could harm the euro exchange rate.
The statements made this week by Christine Lagarde, whose rhetoric can help market participants comprehend what to expect from the regulator in the upcoming months, will also be of utmost significance. The topic of rates for the following two meetings should be regarded as resolved, in our opinion. The ECB decided to slow down the rate of tightening after two rises of 0.75% with the greatest inflation, therefore it is improbable that it will decide on such a step again in the near future. So, we anticipate growth of 1.00% in February and March. Thus, the remarks of the Fed and Lagarde members have the potential to be quite significant, but in practice, none of the officials may provide the market with any crucial information. As before, we should pay particular attention to the “method” and bear in mind that the European currency has recently risen by an unreasonable 1100 points; as a result, a significant downward correction, which we have been waiting for quite some time, may start.
As of January 16, the euro/dollar currency pair’s average volatility over the previous five trading days was 79 points, which is considered to be “normal.” So, on Tuesday, we anticipate the pair to fluctuate between 1.0734 and 1.0893. The Heiken Ashi indicator will turn back up to signal the start of the upward movement.
Nearest levels of support
S1 – 1.0742
S2 – 1.0620
S3 – 1.0498
Nearest levels of resistance
R1 – 1.0864
R2 – 1.0986
Trading Suggestions:
A new micro pullback to the moving average has begun for the EUR/USD pair. Currently, we can take into account opening additional long positions with goals of 1.0864 and 1.0893 if the Heiken Ashi indicator reverses its trend upward. After fixing the price below the moving average line with a target of 1.0620, you can open short positions.
Explanations for the illustrations:
Channels for linear regression – allow us to identify the present trend. The trend is now strong if they are both moving in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.
The material has been provided by InstaForex Company – www.instaforex.com
On Monday, the EUR/USD currency pair continued to rise, but it was unable to surpass the Murray level of “+1/8”-1.0864. As a result, a new round of mild correction has started, which so far hasn’t shown any signs of growing into the scale correction we’re hoping for. We can say that the Monday auction was quiet, tranquil, and pleasant. Given that the macroeconomic and fundamental background will be stable and quiet, the entire current week is not expected to be particularly active. However, it should be remembered that there will still be several significant events that have the potential to cause significant changes in the euro/dollar pair. Due to the substantial decline in market expectations following the release of the US inflation report, we believe that great attention should be paid to the comments made by Fed officials. The monetary committee members will now have to justify whether this report will result in a further slowdown in the pace of tightening monetary policy or whether the Fed won’t give up the “hard” monetary approach in advance. In any case, the dollar might finally become more popular among traders if the Fed members’ rhetoric is “hawkish” and includes suggestions of a 0.5% hike, as it is obvious that it has not been successful in previous weeks. The dollar might decline even further if there are indications of a 0.25 percent increase.
Nothing changed on Monday in terms of technology. The euro remains close to its regional highs and is above all of the Ichimoku indicator’s lines on the 24-hour TF. As a result, there are now no good reasons to sell the pair. By the way, we don’t even consider that a strong fundamental background in favor of the dollar should come before the pair’s decline starts. The pair may suddenly begin traveling in the opposite direction, as it frequently does. If we assume that the market is now anticipating a bold hike from the ECB and a gradual increase from the Fed, then this factor will eventually stop having an impact. Based on that, the pair won’t continue to expand eternally.
In the upcoming three months, the ECB is not likely to alter its approach.
The rate of inflation in Europe will be crucial in the near future. Recall that the US dollar started to decline at about the time when the country’s inflation started to decrease. The slide persisted as the Fed signaled that it was prepared to begin easing off on the pace of tightening monetary policy. The euro currency will eventually suffer the same fate. The ECB may start to provide hints that it is prepared to shift to 0.25% rate hikes if inflation suddenly starts to slow down dramatically and will do so for several months in a row. And for the market, this might be a clear indication to sell the euro. This week will see the release of the second December inflation estimate. Although traders are well aware of it, a further decline in the consumer price index could harm the euro exchange rate.
The statements made this week by Christine Lagarde, whose rhetoric can help market participants comprehend what to expect from the regulator in the upcoming months, will also be of utmost significance. The topic of rates for the following two meetings should be regarded as resolved, in our opinion. The ECB decided to slow down the rate of tightening after two rises of 0.75% with the greatest inflation, therefore it is improbable that it will decide on such a step again in the near future. So, we anticipate growth of 1.00% in February and March. Thus, the remarks of the Fed and Lagarde members have the potential to be quite significant, but in practice, none of the officials may provide the market with any crucial information. As before, we should pay particular attention to the “method” and bear in mind that the European currency has recently risen by an unreasonable 1100 points; as a result, a significant downward correction, which we have been waiting for quite some time, may start.
As of January 16, the euro/dollar currency pair’s average volatility over the previous five trading days was 79 points, which is considered to be “normal.” So, on Tuesday, we anticipate the pair to fluctuate between 1.0734 and 1.0893. The Heiken Ashi indicator will turn back up to signal the start of the upward movement.
Nearest levels of support
S1 – 1.0742
S2 – 1.0620
S3 – 1.0498
Nearest levels of resistance
R1 – 1.0864
R2 – 1.0986
Trading Suggestions:
A new micro pullback to the moving average has begun for the EUR/USD pair. Currently, we can take into account opening additional long positions with goals of 1.0864 and 1.0893 if the Heiken Ashi indicator reverses its trend upward. After fixing the price below the moving average line with a target of 1.0620, you can open short positions.
Explanations for the illustrations:
Channels for linear regression – allow us to identify the present trend. The trend is now strong if they are both moving in the same direction.
Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction.
Murray levels serve as the starting point for adjustments and movements.
Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day.
A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones.
The material has been provided by InstaForex Company – www.instaforex.com
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