EUR/USD. Overview for January 24. China may provoke a new increase in inflation in the EU.
January 24, 2023 8:20 am
The EUR/USD currency pair is gradually increasing. The price was not even able to break below the moving average over the previous week, even though it was close by. Thus, we could once more guarantee that the market is currently either purchasing a pair or remaining motionless. Therefore, there is now no justification for assuming that the growth will come to a halt soon. Global reversals shouldn’t always happen at significant events or publications, as we’ve already stated. Therefore, if someone bases their expectations on the future meetings of the Fed and ECB, this may not be the case. The assumption is that the euro and the pound will continue to rise in value on the back of a very likely 0.5% increase in the key rates of the ECB and the BA in February, while the Fed’s rate would most likely increase by only 0.25%. It turns out that the rates set by the BA and ECB will start to overtake those set by the Fed, which might serve as the rationale for buying European currencies. If this is the case, both pairs may begin moving in the other direction following the meetings (assuming the central banks do not offer any shocks), as this element will have already been thoroughly worked out. However, this is merely a basic theory that needs technical validation, which is lacking.
Remember that for at least a month and a half, we have been debating the legitimacy of the euro and pound’s expansion. The euro currency did not change a few weeks ago, even though the pound did so at least somewhat. As a result, we have been waiting a very long time for a correction. However, the market sentiment is still strong, and traders correctly believe that it is best to merely follow the trend and not need to sell the pair. Despite the pair’s drop yesterday, there was still an overall upward trend. However, neither the EU nor the USA experienced any significant occurrences yesterday. Christine Lagarde didn’t perform again until later in the evening. It will be covered briefly below.
The European Union has yet to find a solution to the inflation issue.
Inflation control has been the focus of EU policy for the past two months. Although we cannot claim it was spectacular, it nonetheless happened. Many have therefore concluded that this marks the “beginning of the end” of the high inflationary period. However, we have often highlighted the possibility that inflation could drop for several months before stagnating at a particular level, for instance, if the ECB decides to cease hiking interest rates. And given that the European economy is more fragile than the American one, it very well could make such a choice. The interests of each country should be taken into consideration because the European economy is a conglomeration of the economies of roughly thirty different nations. As a result, unlike the US, the ECB cannot raise rates “until the bitter end.” As a result, the rate may stop increasing at some point, even when inflation is still well above the desired level.
Christine Lagarde also mentioned yesterday that the European Union would experience a new price hike as a result of China’s move to open its economy. According to Ms. Lagarde, China used less energy last year than it would have with a fully open economy. As a result, there will be a rise in demand for energy resources, the cost of which has drastically decreased recently. As a result, the cost of gas, oil, and energy derivatives will also increase. Remember that high oil and gas costs were a contributing factor to both the rise in inflation last year and the subsequent drop in inflation. Lagarde’s reasoning is thus sound. It is nearly a given that an increase in energy prices will lead to an increase in inflation. This leads us to the conclusion that the battle against inflation is still ongoing. The European regulator may need to increase ECB rates more than initially anticipated and is not prepared for such a development. A bigger rate increase is advantageous for the euro currency, but the European Union’s economic woes do not guarantee that it will occur at all.
As of January 24, the euro/dollar currency pair’s average volatility over the previous five trading days was 83 points, which is considered “normal.” So, on Tuesday, we anticipate the pair to fluctuate between 1.0799 and 1.0965. A new round of moving correctives will be indicated by the Heiken Ashi signal turning downward.
Nearest levels of support
S1 – 1.0864
S2 – 1.0742
S3 – 1.0620
Nearest levels of resistance
R1 – 1.0986
Trading Suggestions:
The EUR/USD pair started moving up again. Until the Heiken Ashi indicator turns down, you can continue holding long positions with goals of 1.0965 and 1.0986. With goals of 1.0799 and 1.0742, short trades can be opened after the price is fixed below the moving average line.
Explanations for the illustrations:
Determine the present trend with the use of linear regression channels. 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
The EUR/USD currency pair is gradually increasing. The price was not even able to break below the moving average over the previous week, even though it was close by. Thus, we could once more guarantee that the market is currently either purchasing a pair or remaining motionless. Therefore, there is now no justification for assuming that the growth will come to a halt soon. Global reversals shouldn’t always happen at significant events or publications, as we’ve already stated. Therefore, if someone bases their expectations on the future meetings of the Fed and ECB, this may not be the case. The assumption is that the euro and the pound will continue to rise in value on the back of a very likely 0.5% increase in the key rates of the ECB and the BA in February, while the Fed’s rate would most likely increase by only 0.25%. It turns out that the rates set by the BA and ECB will start to overtake those set by the Fed, which might serve as the rationale for buying European currencies. If this is the case, both pairs may begin moving in the other direction following the meetings (assuming the central banks do not offer any shocks), as this element will have already been thoroughly worked out. However, this is merely a basic theory that needs technical validation, which is lacking.
Remember that for at least a month and a half, we have been debating the legitimacy of the euro and pound’s expansion. The euro currency did not change a few weeks ago, even though the pound did so at least somewhat. As a result, we have been waiting a very long time for a correction. However, the market sentiment is still strong, and traders correctly believe that it is best to merely follow the trend and not need to sell the pair. Despite the pair’s drop yesterday, there was still an overall upward trend. However, neither the EU nor the USA experienced any significant occurrences yesterday. Christine Lagarde didn’t perform again until later in the evening. It will be covered briefly below.
The European Union has yet to find a solution to the inflation issue.
Inflation control has been the focus of EU policy for the past two months. Although we cannot claim it was spectacular, it nonetheless happened. Many have therefore concluded that this marks the “beginning of the end” of the high inflationary period. However, we have often highlighted the possibility that inflation could drop for several months before stagnating at a particular level, for instance, if the ECB decides to cease hiking interest rates. And given that the European economy is more fragile than the American one, it very well could make such a choice. The interests of each country should be taken into consideration because the European economy is a conglomeration of the economies of roughly thirty different nations. As a result, unlike the US, the ECB cannot raise rates “until the bitter end.” As a result, the rate may stop increasing at some point, even when inflation is still well above the desired level.
Christine Lagarde also mentioned yesterday that the European Union would experience a new price hike as a result of China’s move to open its economy. According to Ms. Lagarde, China used less energy last year than it would have with a fully open economy. As a result, there will be a rise in demand for energy resources, the cost of which has drastically decreased recently. As a result, the cost of gas, oil, and energy derivatives will also increase. Remember that high oil and gas costs were a contributing factor to both the rise in inflation last year and the subsequent drop in inflation. Lagarde’s reasoning is thus sound. It is nearly a given that an increase in energy prices will lead to an increase in inflation. This leads us to the conclusion that the battle against inflation is still ongoing. The European regulator may need to increase ECB rates more than initially anticipated and is not prepared for such a development. A bigger rate increase is advantageous for the euro currency, but the European Union’s economic woes do not guarantee that it will occur at all.
As of January 24, the euro/dollar currency pair’s average volatility over the previous five trading days was 83 points, which is considered “normal.” So, on Tuesday, we anticipate the pair to fluctuate between 1.0799 and 1.0965. A new round of moving correctives will be indicated by the Heiken Ashi signal turning downward.
Nearest levels of support
S1 – 1.0864
S2 – 1.0742
S3 – 1.0620
Nearest levels of resistance
R1 – 1.0986
Trading Suggestions:
The EUR/USD pair started moving up again. Until the Heiken Ashi indicator turns down, you can continue holding long positions with goals of 1.0965 and 1.0986. With goals of 1.0799 and 1.0742, short trades can be opened after the price is fixed below the moving average line.
Explanations for the illustrations:
Determine the present trend with the use of linear regression channels. 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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