At yesterday’s trading, the main currency pair of the Forex market was trading unevenly, as we can see by looking at the EUR/USD charts. However, for now, let us briefly talk about the important economic events of yesterday, and what fundamental information investors expect today.
So, the main event of yesterday was the preliminary data on the GDP of the eurozone for the fourth quarter of last year. According to data provided by the Eurostat agency, the gross domestic product in the region of the single European currency suffered fewer losses than analysts expected. Contrary to economists’ forecasts that the eurozone’s GDP will shrink by 1% in the quarter, the actual figure was less depressing and amounted to minus 0.7%. In annual terms, the actual figure of minus 5.1% was also better than the experts’ expectations, which were reduced to minus 5.4%. However, according to some assumptions, the negative effects of the COVID-19 pandemic have not yet fully affected the European economy, and in the first quarter of this year, the data may be less optimistic. Overall, it is expected to take about two years for the European economy to recover from the coronavirus epidemic. This is nothing new, as the President of the European Central Bank (ECB), Christine Lagarde, has repeatedly mentioned in her speeches.
Today, another important indicator will be received from the eurozone at 11:00 (London time) — the consumer price index, which indicates the state of inflation in the region. From the American statistics, it is worth highlighting the employment data from ADP, which is considered to be a leading indicator of official reports on Nonfarm Payrolls. I also recommend paying attention to the data from the US on the index of business activity in the service sector from the Institute for Supply Management (ISM). You can see the time and forecasts for these and other events in the economic calendar.
As already noted at the beginning of today’s article, trading on February 2 for the euro/dollar was very ambiguous, as evidenced by yesterday’s daily candle with almost equidistant long shadows and a relatively small bearish body. Despite the closing of yesterday’s session below 1.2050, it is still too early to make a clear conclusion that this important level is truly broken. First, one candle closed below 1.2050 (given the strength and significance of this level) is not enough to claim a true breakdown. Secondly, yesterday’s candle with long shadows, of which the lower one is still slightly larger, indicates the difficulties of market participants with further determining the price direction of the main currency pair. Naturally, it will be very important how today’s and tomorrow’s trading will take place, but Friday’s data on the US labor market will put an end to it. There is practically no doubt about it.
In this timeframe, the EUR/USD pair is trading in a descending pink channel, the parameters of which are: 1.2284-1.2155 (resistance line) and 1.2053 (support line). It is noteworthy that at the time of writing this article, trading is conducted near the middle dotted line of this channel. Let me remind you that the middle line is often a kind of “watershed”. If the price is fixed above it, most likely, the movement will continue to the channel resistance line, which is likely to be tested for a breakout. Given that the used moving averages have accumulated under this line, its strength will increase significantly, so I recommend waiting for the pair to rise to the price zone of 1.2115-1.2135 and consider opening short positions on EUR/USD.
At the same time, an additional signal for opening sales will be the appearance of bearish candlesticks in the selected zone, indicating a reversal of the quote in the south direction. Since attempts to gain a foothold above the important mark of 1.2200 for the euro bulls failed, now the level of 1.2100 comes into play. A confident closing and subsequent consolidation above this mark will breathe new energy into the players to increase the rate. Otherwise, the pair will test the most important psychological mark of 1.2000 for a breakdown, which is likely to pass, after which the weakening of the single currency in a pair with the US dollar will continue. So, at the moment, the main trading recommendation for EUR/USD is sales, which are better to open after minor corrective pullbacks up. Alternatively, to open short positions, you can use the price zone highlighted in this review.
The material has been provided by InstaForex Company – www.instaforex.com
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