Everything is the will of the market
Hello, dear colleagues!
Yesterday was not the best day for the US dollar as it suffered losses across a wide range of markets. The market participants' concerns about the pace and quality of mass vaccination against the COVID-19 pandemic and the impact of fiscal stimulus in the United States of America were replaced by a sudden surge of optimism and renewed risk appetite. Despite the fact that the identified problems have not disappeared, and today, at 19:00 UTC, the US Federal Reserve will make its decision on interest rates. As expected, the main refinancing rate will not be changed and will remain in the range of 0.00% - 0.25%. In this regard, investor's attention will be focused on the speech of the head of the Federal Reserve Jerome Powell, which will be held at 19:30 UTC. Most likely, the tone of the Fed Chairman's speech will be soft, bond purchases will continue at least in the same volumes and will end quite soon. But how market participants will react to the supposed soft rhetoric of the head of the Federal Reserve, and, most importantly, how this will affect the price dynamics of the US dollar is an open question. I would like to note that Powell's supposed "dovish" speech can both support the US currency and put pressure on it. If so, I would venture to assume that a lot will be determined by the technical picture, in this case, for the main currency pair of the Forex market. I would like to note that Powell's supposed "dovish" speech can both support the US currency and put pressure on it. If so, I would venture to assume that a lot will be determined by the technical picture, in this case, for the main currency pair of the Forex market. I would like to note that Powell's supposed "dovish" speech can both support the US currency and put pressure on it. If so, I would venture to assume that a lot will be determined by the technical picture, in this case, for the main currency pair of the Forex market.
So, yesterday after an initial decline to 1.2107 EUR / USD found support at the 50 simple moving average, and then went up and ended on January 26 growth, ending the session at 1.2158. Nevertheless, one of the key levels of 1.2200 has not been passed. I think that today's events related to the Fed will be a good catalyst for the market. The pair will either soar significantly above 1.2200, or fall to another very serious and important level of 1.2000. Here, as they say, everything is the will of the market. Why do I think so? Because according to long-term observations, with positive macroeconomic data and the Fed's decisions for the US dollar, the US currency can both strengthen and show weakening. This will be influenced by the external background, investor sentiment and, of course, the technical picture. If we consider the latter factor, then strong support is possible in the area of 1.2220, where the already mentioned 50 MA and the red line of the Tenkan Ichimoku Indicator have almost converged. Resistance in the current situation is concentrated in the area of 1.2189 - 1.2201, where the highs of trading on January 22 are shown and the blue Kijun line of the same Ichimoku Indicator passes. I believe that the subsequent direction of the main currency pair will depend on the true breakdown of the indicated support or resistance. In the days when such serious and significant events for the market are planned, such as the Fed's decision on the rate, after the announcement of which the Fed chairman will also hold a press conference, it is always difficult to make decisions about entering the market , that is, opening new positions. Here, it would be impossible to get a stop for already open ones. The frequency of the situation also lies in the fact that this will be Powell's first speech under the new US President Joe Biden and Treasury Secretary Janet Yellen, whom Powell replaced as head of the US Central Bank.
If we will rely purely on the technical component, then yesterday's assumption about a possible false breakdown of the purple support line 1.2054 - 1.2076 was fully justified. The bears on the pair failed to break through this line, and there was only a puncture, after which the quote rushed up. Today, I suggest paying attention to the accumulation of the used moving averages (89 and 200 EMA and 50 MA) near the strong technical level of 1.2150. Here, the pair can gain strong enough support to continue yesterday's growth and finish today's trading above 1.2200. It is this scenario, in the personal opinion of the author that seems to be the main one. An alternative option is to sell the pair after rising to a strong resistance zone of 1.2190 - 1.2205. With both options of positioning for EUR/USD, it would be nice to enlist the support of the corresponding candle signals, but I am afraid that the volatility after the Fed will be so high that waiting for some signals to appear and only then entering the market will be a decision too late. The conclusion is simple. Those interested can use the recommendation regarding purchases and sales, which is given above. More cautious traders, who on such an important day (or rather evening) do not want to take risks, it is better to stay out of the market and calmly watch everything that happens.
Have a good luck!
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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