FX.co ★ Technical Analysis of EUR/USD for January 31, 2024

The EUR/USD Trends Ahead Of FOMC Interest Rate Decision

Key Takeaways

1. Dollar's Strength vs. AUD's Weakness: The US dollar's rise and the Australian dollar's fall, influenced by Australia's lower-than-expected inflation rates.
2. Japan and China's Economic Data: Japan faces a downturn in industrial production and retail sales, while China's manufacturing PMI indicates an economy striving for recovery.
3. FOMC's Awaited Decision: The FOMC interest rate decision remains a pivotal event, potentially impacting forex market trends.

Morning Brief: Market Dynamics Set the Stage

The global financial stage is marked by varied performances in the Asia-Pacific stock markets. Japan's Nikkei 225 and Australia's S&P ASX 200 demonstrate gains, whereas the Kospi in South Korea and Chinese markets show declines. These shifts have a ripple effect on the forex market, with the US dollar emerging as a formidable contender among the G10 currencies, contrasting with the Australian dollar's decline following unexpected inflation data.

Chinese factory activity fell for the fourth month in a row, but preliminary PMI data was in line with expectations. PMI for manufacturing remained only slightly below the 50-point threshold in January. which was a signal that the domestic economy was trying to regain momentum:

Manufacturing PMI: current 49.2; forecast 49.2; previously 49.0;

Services PMI: current 50.7; forecast 50.6; previously 50.4;

The main event of the day is FOMC interest rate decision and press conference scheduled at 7:00 PM GMT

Technical Market Outlook: EUR/USD Analysis

The EUR/USD pair reveals a complex narrative, displaying a bounce from a low point and reaching a new local high. Notable are the potential Bullish Ending Diagonal Pattern and confirmed Bullish Divergence, indicating a possible shift in market dynamics. The pair faces resistance in the 1.0846 and 1.0830 zones, which are crucial for determining the short-term market outlook.

Technical Insights: Delving into the Details

• Trend Indicators: The H4 chart signals a downtrend with descending trendlines, suggesting bearish sentiment.
• Candlestick Patterns: Identification of bullish hammers hints at potential upward movement, contingent on future market behavior.
• Moving Averages: The price's position below key moving averages further confirms bearish momentum.
• RSI Analysis: The RSI's position near 41 suggests mild bearish momentum, with room for further decline.

Intraday Indicator Analysis: EUR/USD

• Technical Indicators: Majority signal a Sell, with a minority indicating Buy or Neutral.
• Moving Averages: Predominantly signaling Sell, with a few pointing towards Buy.

Sentiment Analysis: Market Mood

The sentiment scoreboard leans towards bullishness, although the last three days show a neutral stance, reflecting the market's uncertainty.

Weekly Pivot Points: Key Levels

• Resistance Levels (WR3 - WR1): 1.08727 - 1.08450
• Pivot Point: 1.08389
• Support Levels (WS1 - WS3): 1.08281 - 1.08051

Bullish Scenario: Optimistic Outlook

• Key Indicators: Breaking the descending trendline and closing above the 50-period DEMA and 100-period EMA.
• RSI Movement: An RSI above 50 would indicate growing bullish momentum.
• Candlestick Confirmation: Bullish patterns post-breakout would solidify the optimistic scenario.

Bearish Scenario: Cautious Approach

• Continued Downtrend: Respect for the descending trendline and creation of new lows.
• Moving Averages and RSI: Downward-sloping averages and an RSI below 50 or nearing oversold conditions would support a bearish view.

Conclusion:

In conclusion, while both bullish and bearish scenarios exist for EUR/USD, traders should remain vigilant of the key indicators and market sentiments. Adhering to a cautious approach and considering both scenarios will enable traders to make informed decisions in the volatile forex market.

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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