14.01.202116:40 Forex Analysis & Reviews: EUR/USD analysis for January 14. USD strictly follows existing wave pattern while markets monitor Donald Trump's impeachment

Exchange Rates 14.01.2021 analysis

The wave pattern of the EUR/USD pair has again taken a fully completed five-wave form. Thus, now we can expect the formation of a new descending section of the trend. If this is true, the price will continue to decline to the targets located at around 19 and 18 marks. However, we should keep in mind that the demand for the US dollar has been extremely low in recent months. So, the price may resume the uptrend, and the ascending section may become more complex.

Exchange Rates 14.01.2021 analysis

The wave structure on a smaller time frame indicates the completion of the uptrend. The supposed 5 in 5 wave has completed its formation. A successful attempt to break through the lowest point of the wave 4 means that the pair is ready to build at least a three-wave descending section. Everything is pointing at the formation of a new trend segment which could indicate the beginning of a correction. In any case, I expect the instrument to build at least three descending waves.

So far, 2021 has been marked with important political events in the United States. However, this flow of political information does not seem to impress the markets. Investors may perceive this just as part of a bigger show. It is fun and exciting, and there is something to talk about. The US dollar, which had been going through an extended fall for most of 2020, began to rise in 2021. Most probably, this has nothing to do with the riot which happened on January 6 in the Capitol. I also think that the impeachment of Donald Trump is not the reason. Moreover, it is unlikely to happen or it will take place a few months after the president leaves office. Actually, the US currency should have declined instead. Therefore, I think that there is no correlation between the events in Washington and the movement of the euro/dollar pair.

Yesterday's speech by ECB President Christine Lagarde had also little effect on the foreign exchange market. The ECB head discussed bitcoin and the need to regulate this risky and highly speculative asset. As for the EU economy, Lagarde said that at the beginning of 2021 the situation would neither improve nor deteriorate. There is still not enough information on the third coronavirus wave. Besides, it is unclear how fast the vaccination process will go. What will be the effect of the new virus strain on the world's population? The uncertainty is extremely high. The data on inflation rate in the US was even less interesting for the markets. Even though the consumer price index increased to 1.4% y/y, the US currency managed to regain ground even before this report was issued. Thus, today's background has had almost no effect on EUR/USD.

Conclusion and trading tips

The EUR/USD pair has supposedly completed the ascending section of the trend. Thus, I recommend selling the pair with the targets at 20 and 19 areas, following each new sell signal of the MACD indicator. The current pattern does not look like a simple corrective wave. It looks rather like the end of the uptrend. It is also not clear to what extent this descending pattern will stretch and how strong it will be.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Chin Zhao,
Analytical expert
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