18.01.202115:23 Forex Analysis & Reviews: Analysis and forecast for EUR/USD on January 18, 2021

At the auction on January 11-15, the main currency pair of the Forex market turned in a southerly direction and declined, closing the weekly trading at 1.2079. The US dollar was supported last week by rising US bond yields, the announcement by President-elect Joe Biden of a $ 1.9 trillion fiscal stimulus plan, tighter blockages against the spread of the COVID-19 pandemic in several countries, and slower-than-expected universal vaccination of the population against coronavirus. Against this background, the risk appetite of investors has somewhat weakened, and they preferred safe assets, one of which is the US dollar. It should also be emphasized that a very significant role in the strengthening of the US currency was played by the technical picture, in which many major currency pairs showed reversal signals in favor of strengthening the dollar.


Exchange Rates 18.01.2021 analysis

As noted a week earlier, the strong bearish reversal pattern of the "Tombstone" candle analysis simply could not go unnoticed by market participants and should have led to a reversal of the main currency pair to decline, which eventually happened. The movement of the euro/dollar down, as a result of which such important and significant levels for the market as 1.2200, 1.2150, and 1.2100 were passed, was stopped only by the red line of the Tenkan Ichimoku indicator. Once again, I would like to note that, depending on the situation, the Tenkan and Kijun lines of this indicator act as strong supports or resistances. That is why in almost every review I mention these lines and draw the attention of readers to them. At the same time, since this topic has already been discussed, I note that the Tenkan and Kijun lines, as well as both boundaries of the Ichimoku indicator cloud, have the greatest strength on the weekly and daily charts. But on H4, for example, there are quite a lot of false positives, so I installed the Ichimoku indicator on my charts only on the "day" and "week". This question seems to have been sorted out, and I think that the idea is clear. Now about the prospects of the EUR/USD price movement concerning the weekly timeframe. I believe that there are quite good chances to continue the downward trend. However, to do this, the bears on the instrument will have to overcome the red Tenkan line, and then lower the price below the strong and significant levels of 1.2030 and 1.2000. The first level is very strong technically, and the second is one of the most important psychological levels. For the bulls to regain control of the pair, they need a true breakdown of the resistance level of 1.2350 and the closing of weekly trading above this mark. I believe that this task is very difficult and hardly feasible. Given the current technical picture on the weekly chart, the development of the reversal candle model "Tombstone" is likely to continue, which means that the euro/dollar will continue to move in a southerly direction.


Exchange Rates 18.01.2021 analysis

Despite the rather ambiguous and mixed Friday statistics from the United States, in particular weak retail sales, this did not prevent the US currency from showing a significant strengthening against the euro. What we see on the daily chart is exactly how the signals break down, in this case, the bears have absorbed the potential reversal highlighted candle from January 14. This factor of breaking the reversal model can signal neither a correction, but a change in the trend, as it demonstrates the strength of bearish sentiment for EUR/USD. If these assumptions are correct, and looking at the daily and weekly charts, there is almost no doubt about this, then the main trading idea for EUR/USD should be considered sales, which are better to open after corrective pullbacks to broken levels and at more attractive prices. I recommend that you take a closer look at the opening of transactions for the sale of euro/dollar after corrective pullbacks to the price area of 1.2100-1.2110 and from the price zone of 1.2140-1.2150. That's all for now. In tomorrow's article, we will look at lower timeframes, and if necessary, we will make adjustments to today's trading recommendations for EUR/USD.

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

Ivan Aleksandrov,
Analytical expert
InstaForex Group © 2007-2021
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