20.01.2021: EUR about to edge lower against USD: outlook for EUR/USD, GBP/USD
Traders remain cautious in anticipation of Joe Biden's inauguration and amid the released inflation data.
The UK inflation rate surged to 0.6% from 0.3%. As a result, the pound sterling gained favour among buyers and was able to return to its multi-year high. Investors hope that higher consumer prices will force the Bank of England to at least postpone another package of measures aimed at loosening monetary policy.
However, the business community is not satisfied with the terms of the new EU-UK trade and cooperation agreement, which paves the way for such measures. However, a sharp rise in inflation raises hopes that the regulator will hold off on these measures until the end of February. Until that time, things may return to normal. Businesses may well adapt to new conditions, and tensions may ease somewhat.
The situation in the euro area is opposite. Eurozone consumer prices have been falling for the fifth month in a row. Moreover, the annual decline remains unchanged at minus 0.3% past for a third consecutive month.
Tomorrow, the European Central Bank may unveil another package of measures aimed at loosening monetary policy. At best, Christine Lagarde may announce plans to adopt new measures in the near future.Nevertheless, both scenarios will result in diminishing returns on investment in the European economy. So it is no surprise that the common European currency has resumed its downward trend.
After reaching the 1.2059 local low logged on December 9, the euro/dollar pair pulled back and returned to the previous range of 1.2130-1.2170.
According to the trading chart, market participants appear to consider this range a possible resistance zone, reducing the volume of long positions.
If the price consolidates below 1.2110, the path to the base point of its correction, 1.2053, will open.
The pound/dollar pair is moving in an upward trend from the pivot point of 1.3519, with a view to touching the high of the medium-term trend.
According to the trading chart, the price is fluctuating near the resistance level of 1.3690. This may lead to a reduced number of long positions, followed by another price rebound, if the pattern repeats.
As an alternative, the price may consolidate above 1.3710 on the four-hour chart. In this case, the mid-term trend will resume.
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