FX.co ★ Technical Analysis of EUR/USD for January 26, 2024

EUR/USD Drops Further As German Data Disappoints

Key Takeaways

1. EUR/USD Decline: The pair continues to trend downward, reaching a new low at 1.0814.
2. PCE Inflation Impact: US inflation data plays a crucial role in shaping market trends.
3. Technical Indicators Suggest Caution: A bearish trend with potential reversal signs.

Morning Brief:

Economic Data and Its Impact

In today's calendar, the only and most important event of the day will be the publication of the PCE inflation report in the US at 2:30 p.m. The Core Personal Consumption Expenditures Index (core PCE) is the Federal Reserve's preferred measure of inflation. The data should confirm further approach to the 2.0% target, as expectations indicate an annual decline to 3.0% y/y compared to 3.2% y/y in November. In addition to progress at the core level, headline PCE inflation is also expected to fall to 2.6% in November and is expected to remain stable in the December reading.

Detailed daily calendar:

00:30, Japan - inflation data for January:

CPI in Tokyo, excluding food and energy: current -0.4% m/m; previously 0.1% m/m;

Tokyo CPI: current 1.6% y/y; previously 2.4% y/y;

CPI: current 2.2% y/y; previously 2.7% y/y;

Core CPI in Tokyo: current 1.6% y/y; forecast 1.9% y/y; previously 2.1% y/y;

00:50, Japan - Minutes of the monetary policy meeting

08:00, Germany - GfK consumer climate in Germany for February:

forecast -24.5; previously -25.1;

14:30, United States - inflation data for December:

Core consumer spending price index (PCE): forecast 0.2% m/m; previously 0.1% m/m;

Core Consumer Expenditures Price Index (Core PCE): forecast 3.0% y/y; previously 3.2% y/y;

Global Economic Overview

Japan's inflation data and Germany's GfK consumer climate are also crucial for forex traders. These data points provide insights into the economic health of significant economies, impacting the EUR/USD dynamics.

Technical Analysis

Current Market Position

The EUR/USD pair is in a downtrend, with the latest low at 1.0814. The next bearish target is at 1.0743, a December 2023 low. Resistance levels at 1.0846 and 1.0830 form the new supply zone.

Trend and Indicator Observations

The pair is below key moving averages, indicating bearish sentiment. Hammer patterns suggest potential reversals, while the bearish engulfing pattern implies continued downtrend. The RSI nears oversold territory, hinting at possible market consolidation or reversal.

Sentiment Analysis

Traders' Perspectives

General sentiment leans bullish, with a noticeable interest in the pair's future movements. Understanding trader sentiment is vital for anticipating market trends.

Weekly Pivot Points

Pivot Points indicate critical price levels for potential reversals or continuations.

WR3 - 1.09393

WR2 - 1.09207

WR1 - 1.09136

Weekly Pivot - 1.09021

WS1 - 1.08950

WS2 - 1.08835

WS3 - 1.08649

Trading Insights

Bullish Scenario

• Initial Signal: RSI nears oversold; hammer patterns indicate potential reversal.
• Confirmation: Price breaking above moving averages, supported by volume.
• Price Action: Rising towards the recent peak, then targeting next resistance.
• Scenario Strengthens: With favorable Eurozone data or weak US Dollar indicators.

Bearish Scenario

• Initial Signal: Price fails to rise, breaks below support.
• Confirmation: Sustained downward movement with increased volume.
• Price Action: Targeting next support level, strong bearish momentum.
• Scenario Strengthens: With negative Eurozone news or strong US data.

Conclusion

EUR/USD traders should closely monitor upcoming economic releases and technical indicators. While the bearish trend prevails, potential reversal signals warrant attention. Decisions should be made considering broader economic contexts and technical analysis.

Useful Links

• More Artcles
• InstaForex Course for Beginners
• Open Trading Account

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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