FX.co ★ Technical Analysis of EUR/USD for January 17, 2024

Market Braces for Impact: Key Economic Releases Set to Stir EUR/USD moves

Morning Market Overview

The day's economic focus is on the US, with key data releases expected. European futures are down, influenced by Chinese market lows. The USD's strength hinges on US retail sales and industrial production data, following Fed member Waller's remarks on rate cuts. This backdrop sets the stage for heightened market volatility.

Key Takeaways:

1. The EUR/USD pair is under scrutiny as it navigates below crucial trendline support, reflecting intensified bearish momentum.
2. A slew of economic data releases and central bank speeches are poised to dictate short-term market sentiment and directional bias.
3. Technical indicators signal a nuanced market landscape, with potential for both bullish reversals and bearish continuations, demanding careful analysis.

Market Mood Precedes Data Deluge

The EUR/USD pair recently slipped beneath a significant trendline, indicating potential bearish undercurrents. This technical movement coincides with a broader market sentiment that's cautiously eyeing a series of high-impact economic releases. As futures contracts in European benchmarks retreat and Chinese indices touch new lows, the global financial pulse seems to skip a beat. The spotlight turns to the US, where retail sales and industrial production figures await release, promising to either alleviate or amplify market tremors.

Technical Terrain: A Bearish Bias with a Glimmer of Reversal

The EUR/USD pair's descent to a new local low at 1.0856 post breaking the 1.0928 support hints at a bearish stronghold. However, the presence of a Hammer Candlestick pattern and an RSI flirting with the oversold boundary suggest a battlefield where bulls might stage a comeback. The overlay of the 100-period EMA and the 50-period DEMA further complicates the narrative, acting as potential dynamic resistances in any upward price journey.

Economic Events: A Calendar Packed with Market Movers

The trading day is laden with economic releases ranging from the Eurozone's final CPI to US retail sales, industrial production, and the Fed's Beige Book. Additionally, earnings reports from major US corporations and a lineup of central bank speakers add layers of complexity to the market's direction. The collective influence of these events holds the power to either reinforce the current bearish sentiment or ignite a bullish resurgence.

Key Data Releases:

11:00 - Euro zone, final CPI inflation (December 2023). Expected: 2.9% Previous: 2.9%

CPI m/m: Expected: 0.2% Previously: -0.6%

Core CPI y/y. Expected: 3.4% Previous: 3.4%

14:30 - USA, Retail sales m/m. Expected: 0.4% Previous: 0.3%

Baseline sales m/m. Expected: 0.2% Previous: 0.2%

14:30 - Canada, RMPI reading. Expected: -1.6% Previous: -4.2%

15:15 - USA, Industrial production m/m. Expected: -0.1% Previous: -0.2%

16:00 - USA, NAHB Index Expected: 39 Previous: 37

20:00 - USA, Fed Beige Book

Q4 2023 earnings season (US):

Charles Schwab (CHWB.US) - before the session

US Bancorp (USB.US) - before the session

Citizen Financials (CFG.US) - before the session

Kinder Morgan (KMI.US) - after the session

Alcoa Corp (AA.US) - before the session

Central bankers' speeches:

ECB Cipollone (9:30)

ECB Vasle (9:45)

ECB Simkus (10:15)

ECB Villeroy (10:30)

ECB Vujcic (12:30)

Fed Bowman (15:00)

Fed Barr (15:00)

ECB Lagarde (16:15)

ECB Nagel (19:30)

Fed Williams (21:00)

Analyst's Perspective: Balancing Bearish Momentum with Bullish Hints

• For Bulls: The confirmation of the Hammer pattern coupled with a break above the trendline resistance and moving averages could signal a shift in momentum. Traders might consider these technical cues as potential entry points, with the moving averages offering dynamic support.
• For Bears: The prevailing downtrend and technical indicators may encourage following the bearish wave. However, caution around potential reversal signals is advisable. Traders might ponder profit-taking or adjusting stop losses, especially as the RSI approaches the oversold region, hinting at a possible market correction.

Conclusion

As the EUR/USD pair navigates through a complex web of economic releases and technical signals, market participants are advised to tread with caution. The blend of bearish patterns and potential bullish reversal indicators necessitates a balanced approach, integrating technical analysis with vigilant monitoring of the economic calendar. Whether bullish or bearish, traders are reminded to align their strategies with the prevailing market pulse, prepared to adapt as the narrative unfolds.

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Important Notice

The begginers in forex trading need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp market fluctuations due to increased volatility. If you decide to trade during the news release, then always place stop orders to minimize losses.

Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. For successful trading, you need to have a clear trading plan and stay focues and disciplined. Spontaneous trading decision based on the current market situation is an inherently losing strategy for a scalper or daytrader.

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