Hourly chart of the EUR/USD pair
The EUR/USD pair continued its upward movement on Wednesday, but after reaching the resistance level of 1.2157, it turned down and started a round of correction that we mentioned in the previous articles. Since the correction was quite deep, and the downward trend was canceled, then we should expect a new buy signal from the MACD in the coming hours, which is sufficiently discharged to create a strong signal. In general, the pair retains good chances for an upward movement, since the demand for the US dollar as a whole remains rather low. In the morning article, we advised you to consider long positions, but a buy signal was not generated during the day. In order to be able to open short positions, we advised you to wait for the unambiguous end of the upward trend, which also did not happen during the day.
The consumer price index for December was published in Europe. Traders were disappointed with how boring this report was, as the value of the indicator remained unchanged in comparison with the previous period. Thus, we cannot conclude that the euro fell today due to the inflation report. Simply because all the latest reports have been ignored, like so many others. Of course, purely theoretically, the consumer price index could provoke a fall in the euro, even the timing is approximately the same. But for now, we're not giving it much of a chance. No more reports during the day. Approximately at the same time, the inauguration of Joe Biden is taking place in America, but this event is unlikely to be somehow connected with the dollar's growth during the day. At least, we do not see an unambiguous connection.
The European Union will sum up the results of the European Central Bank meeting. No important decisions are expected, so the press conference after the announcement of the results will be more interesting. We might receive information that we have not heard before, although we are inclined to believe that the meeting will be of "passing". The report on applications for unemployment benefits in the United States will be more interesting. A week earlier, the number of orders significantly exceeded the forecasted values, so if a similar trend is noted this week, it could create pressure on the US dollar, which coincides with our expectations of a fall in this currency.
Possible scenarios on January 21:
1) Long positions became relevant since the price settled above the descending channel. However, novice traders are advised to wait for a new buy signal from the MACD indicator. If such is formed, then you are advised to trade upward while aiming for resistance levels 1.2157 and 1.2187 (will be specified Thursday morning).
2) Trading for a fall is currently canceled. Now, to resume trading down, the new upward trend must be undoubtedly reversed. To do this, an ascending channel or trend line must be formed and then canceled. Or, the price should fall below the current local low of 1.2055. Nothing of the kind is expected, at least until Thursday morning.
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.