4-hour timeframe
Technical data:
The upper channel of linear regression: direction - up.
The lower channel of linear regression: direction - up.
The moving average (20; smoothed) - up.
CCI: -22.1873
For the EUR/USD currency pair, the first trading day of the week ended with an increase to the Murray level of "7/8"-1.1200. We did not expect that the week would start with the strengthening of the euro currency, however, rather strong and optimistic data on business activity in the services sectors of the EU countries caused additional demand for the euro currency. Thus, the euro-dollar pair once again fixed above the moving average line, so the current trend has again changed to an upward one. However, we still believe that the pair has completed the formation of an upward trend, and the pullback up in recent days just turned out to be stronger than originally expected. Today, we will be able to test this hypothesis. If the downward movement resumes after the price rebound from the Murray level of "7/8", then the downward trend will resume with a probability of 90%. If the level of "7/8" is overcome, we will be forced to state the fact that the bulls are back in the game.
Today's macroeconomic statistics will be reduced to the publication of the preliminary value of the consumer price index in the European Union for December. Recall that the absolute minimum value was recorded in October 2019 - only +0.7% y/y. Already next month, inflation accelerated to 1.0%, and in December, it is expected to increase by 1.3% y/y. On the one hand, the acceleration of inflation to 1.3% is certainly a positive factor for the euro currency, on the other hand - the value of inflation for December is not final, on the third hand - 1.3% is small anyway, and on the fourth - for the euro currency, such news will be regarded as positive. In general, we believe that the restrained growth of the European currency can show today, by 20-30 points, if inflation is at least 1.3% y/y. Also, the European Union will publish a retail sales figure for November, which, according to experts, could reach 1.3% y/y. This is one of the lowest values for the last year, so if the forecast value is not exceeded significantly, this macroeconomic report may not cause any support for the euro.
In the United States, a very important index of business activity in the service sector ISM for December will be published today. Recall that the same index of business activity in the manufacturing sector failed, amounting to only 47.1. It is unlikely that the same will happen with the index for the service sector. The indicator is projected to grow from 53.9 to 54.5 and, if the forecast comes true, this value will show the excellent state of the US service sector. The US dollar may also respond with a strong strengthening of this report. Also, data on production orders for November will come from overseas, which may be reduced by 0.8% m/m.
In general, we see that macroeconomic statistics can support both the euro and the US dollar today. Therefore, we believe that the main option should be considered a downward movement from the Murray level of "7/8" below the moving average line with the resumption of the downward trend, but also be ready for a reversal of the Heiken Ashi indicator-up, which signals a resumption of the upward movement.
Meanwhile, the geopolitical situation in the world continues to heat up. More precisely in the Middle East. This region has long been known for its instability. Now, Iran has lifted all restrictions on uranium enrichment, so the nuclear agreement with the United States in exchange for the lifting of sanctions can be fully considered thrown in the trash. Now Iran will continue to work on nuclear weapons, and the United States will continue to resist it. Donald Trump has already tweeted that "Iran will never have a nuclear weapon." Also, do not forget that Iran has promised: "cruel revenge" for the murder of Colonel Kalem Soleimani. Thus, soon, it is quite possible to expect a new round of this military conflict.
The average volatility of the euro-dollar currency pair fell to 51 points, which is the average value for the euro currency. Thus, we have volatility levels on January 7 - 1.1144 and 1.1246. The reversal of the Heiken Ashi indicator downwards signals a possible resumption of the downward movement to the lower border of the volatility channel. Overcoming the Murray level of "7/8" by the bulls will indicate the bulls' intention to continue buying the euro.
Nearest support levels:
S1 - 1.1169
S2 - 1.1139
S3 - 1.1108
Nearest resistance levels:
R1 - 1.1200
R2 - 1.1230
R3 - 1.1261
Trading recommendations:
The euro-dollar pair is currently being adjusted, but soon, this correction may get the status of an upward trend. Thus, for the time being, it is recommended to wait for its completion, and then resume trading on the downside with the targets of 1.1139 and 1.1108. You can formally buy the euro currency now with the targets of 1.1200 and 1.1230, but you need to at least wait for the Heiken Ashi indicator to turn up.
In addition to the technical picture, you should also take into account the fundamental data and the time of their release.
Explanation of the illustrations:
The upper channel of linear regression - the blue lines of the unidirectional movement.
The lower channel of linear regression - the purple lines of the unidirectional movement.
CCI - the blue line in the indicator window.
The moving average (20; smoothed) - the blue line on the price chart.
Murray levels - multi-colored horizontal stripes.
Heiken Ashi - an indicator that colors bars in blue or purple.
Possible variants of the price movement:
Red and green arrows.
