Global macro overview for 22/01/2018

During the night, we have a meeting of the Bank of Japan, which has gained in importance due to a growing global investors speculation regarding a possible tightening of monetary policy (after the bank reduced the pool of purchased government bonds). Nevertheless, market participants expect that BoJ will remain dovish, and Governor Kuroda's will emphasize that the main policy tool is the control of the yield curve (maintaining the yield of 10-year bonds close to 0%). If the message is supported by the lack of an increase in core inflation forecasts, due to strong JPY, this may reverse the recent USD / JPY decline.

It's among the primary methods the Bank of Japan uses to communicate with investors regarding monetary policy. It covers the factors that affected the most recent interest rate decision, the overall economic outlook, inflation, and clues regarding future monetary policy.

Let's now take a look at the USD/JPY technical picture at the H4 time frame. The market corrective rally was rejected at the 38% Fibo at the level of 111.40 and since then the price declined towards the nearest technical support at the level of 110.61. The momentum is still hovering around its fifty level, so it is very likely the down move to be continued.

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Global macro overview for 22/01/2018

The US Congress has failed to pass legislation on lengthening public administration finances, and from Saturday, federal employees can not go to work (for which they will not be paid). The weekend talks did not bring results, but the Senate is expected to return to the debate today at 05:00 GMT. Republicans and Democrats in mutual struggle want to get as much as possible for their side in terms of budget spending, but this childishness on the market is not impressive yet. A few days of administrative paralysis is not a big problem - in 2013, the offices did not operate for 16 days, which lowered the economic growth in this quarter by 0.3%. It's only if it's taken longer, the USD has nothing to fear. However, press reports indicate that both sides are not far from agreement. Therefore, after the initial weakening of the dollar at the opening of trading on Monday, now there is no trace. Despite this, some distaste remains, and this will block the dollar and adds to the general reluctance of investors to currency in early 2018.

Let's now take a look at the US Dollar Index at the H4 time frame. The market is still in consolidation mode as there was almost no reaction to the recent US news. The nearest technical support is seen at the level of 90.11 and the nearest technical resistance is seen at the level of 90.98. Please notice, the momentum indicator is still hovering around its fifty level, so there is still a chance for another leg down in this market.

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Global macro overview for 22/01/2018

The US Congress has failed to pass legislation on lengthening public administration finances, and from Saturday, federal employees can not go to work (for which they will not be paid). The weekend talks did not bring results, but the Senate is expected to return to the debate today at 05:00 GMT. Republicans and Democrats in mutual struggle want to get as much as possible for their side in terms of budget spending, but this childishness on the market is not impressive yet. A few days of administrative paralysis is not a big problem - in 2013, the offices did not operate for 16 days, which lowered the economic growth in this quarter by 0.3%. It's only if it's taken longer, the USD has nothing to fear. However, press reports indicate that both sides are not far from agreement. Therefore, after the initial weakening of the dollar at the opening of trading on Monday, now there is no trace. Despite this, some distaste remains, and this will block the dollar and adds to the general reluctance of investors to currency in early 2018.

Let's now take a look at the US Dollar Index at the H4 time frame. The market is still in consolidation mode as there was almost no reaction to the recent US news. The nearest technical support is seen at the level of 90.11 and the nearest technical resistance is seen at the level of 90.98. Please notice, the momentum indicator is still hovering around its fifty level, so there is still a chance for another leg down in this market.

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Global macro overview for 22/01/2018

The US Congress has failed to pass legislation on lengthening public administration finances, and from Saturday, federal employees can not go to work (for which they will not be paid). The weekend talks did not bring results, but the Senate is expected to return to the debate today at 05:00 GMT. Republicans and Democrats in mutual struggle want to get as much as possible for their side in terms of budget spending, but this childishness on the market is not impressive yet. A few days of administrative paralysis is not a big problem - in 2013, the offices did not operate for 16 days, which lowered the economic growth in this quarter by 0.3%. It's only if it's taken longer, the USD has nothing to fear. However, press reports indicate that both sides are not far from agreement. Therefore, after the initial weakening of the dollar at the opening of trading on Monday, now there is no trace. Despite this, some distaste remains, and this will block the dollar and adds to the general reluctance of investors to currency in early 2018.

Let's now take a look at the US Dollar Index at the H4 time frame. The market is still in consolidation mode as there was almost no reaction to the recent US news. The nearest technical support is seen at the level of 90.11 and the nearest technical resistance is seen at the level of 90.98. Please notice, the momentum indicator is still hovering around its fifty level, so there is still a chance for another leg down in this market.

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The material has been provided by InstaForex Company - www.instaforex.com

Global macro overview for 22/01/2018

The US Congress has failed to pass legislation on lengthening public administration finances, and from Saturday, federal employees can not go to work (for which they will not be paid). The weekend talks did not bring results, but the Senate is expected to return to the debate today at 05:00 GMT. Republicans and Democrats in mutual struggle want to get as much as possible for their side in terms of budget spending, but this childishness on the market is not impressive yet. A few days of administrative paralysis is not a big problem - in 2013, the offices did not operate for 16 days, which lowered the economic growth in this quarter by 0.3%. It's only if it's taken longer, the USD has nothing to fear. However, press reports indicate that both sides are not far from agreement. Therefore, after the initial weakening of the dollar at the opening of trading on Monday, now there is no trace. Despite this, some distaste remains, and this will block the dollar and adds to the general reluctance of investors to currency in early 2018.

Let's now take a look at the US Dollar Index at the H4 time frame. The market is still in consolidation mode as there was almost no reaction to the recent US news. The nearest technical support is seen at the level of 90.11 and the nearest technical resistance is seen at the level of 90.98. Please notice, the momentum indicator is still hovering around its fifty level, so there is still a chance for another leg down in this market.

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The material has been provided by InstaForex Company - www.instaforex.com

Pound found a weak link

The British pound demonstrated its best start since 2014, strengthening against the US dollar caused by the growing hopes for a soft Brexit, the expectations of the continuation of the cycle of normalization of the monetary policy of the Bank of England, and the unwillingness of the "Greenback" to regain position on positive news. On the contrary, the negative news from the States is actively used by the bulls of the GBP / USD pair to build up long positions. Their size has reached a maximum mark last seen in March 2014.

According to the latest Reuters poll, the probability of Britain's withdrawal from the EU without a deal dropped from 25% in December to 20%. In October, the indicator reached 30%. European Commission President Jean-Claude Juncker said he would welcome the decision of the United Kingdom to return after the "divorce." Additional support for the sterling was provided by information about the readiness of the Social Democrats to negotiate with the Angela Merkel's bloc on the creation of a coalition. The latter is seen as a favorable option for London in negotiating for Brexit. However, Banco Santander drew attention to the fact that premiums on call options exceeded the value of put options placed on pound for the first time since 2009, which increases the risks of correction in case of negative headlines on Brexit.

The weakness of the US dollar played a significant role in the near 3% rally of the GBP / USD since the beginning of the year. This is clearly seen from the comparison of the dynamics of the pair and the trade-weighted sterling rate. In its structure, 48% belongs to the euro and only 19.4% to the "Greenback". In this regard, information about the disconnection of the US government was enthusiastically received by the pound fans. In our opinion, the stability of the GBP TWI allows the Bank of England to adhere to the "hawkish" rhetoric, which is a bullish factor for the currency of the United Kingdom. It is quite capable of continuing the upward trend thanks to the previous drivers: a soft Brexit and expectations of BoE rebate on rate increase.

Dynamics of GBP / USD and the weighted trade rate of the pound

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Source: Financial Times.

The "bulls" are not particularly upset for the analyzed pair and the data released on inflation and retail sales. The CPI slowdown, and in our opinion, should be considered as a positive signal for the pound. The matter is that in case of acceleration of average wages, real incomes of the population will increase. However, so will purchasing power, which will contribute to GDP growth. "Bears", on the contrary, pay attention to the reduction of labor in August-October. If the trend continues, this will be the first bell to worsen the conjuncture of the labor market of the United Kingdom. The release of employment data, coupled with the publication of statistics on GDP for the fourth quarter, allows the sterling to claim the title of the most interesting currency of the week.

Technically, the GBP / USD pair has a stable upward trend. "Bulls" are seriously set to implement the target by 161.8% on the AB = CD pattern. It corresponds to 1.405. Meanwhile, quotes are above the support level at 1.3805. The ball is ruled by buyers of the pound.

GBP / USD, daily chart

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Intraday technical levels and trading recommendations for EUR/USD for January 22, 2018

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Monthly Outlook

In January 2015, the EUR/USD pair moved below the major demand levels near 1.2050-1.2100 (multiple previous bottoms set in July 2012 and June 2010). Hence, a long-term bearish target was projected toward 0.9450.

In March 2015, EUR/USD bears challenged the monthly demand level around 1.0500, which had been previously reached in August 1997.

In the longer term, the level of 0.9450 remains a projected target if any monthly candlestick achieves bearish closure below the depicted monthly demand level of 1.0500.

However, the EUR/USD pair has been trapped within the depicted consolidation range (1.0500-1.1450) until the current bullish breakout was executed above 1.1450.

The current bullish breakout above 1.1450 allowed a quick bullish advance towards 1.2200 where recent evidence of bearish rejection was expressed (Note the Monthly candlestick of last September).

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Daily Outlook

As anticipated, the ongoing bullish momentum allowed the EUR/USD pair to pursue further bullish advance towards 1.1415-1.1520 (Previous Daily Supply-Zone).

The daily supply zone failed to pause the ongoing bullish momentum. Instead, the evident bullish breakout was expressed towards the price level of 1.2100 where the depicted Head and Shoulders reversal pattern was expressed.

The bearish target for the depicted Head and Shoulders pattern extends towards 1.1350. However, the market failed to apply significant bearish pressure against the mentioned zone (1.1415-1.1520).

Instead, In November, evident bullish recovery was manifested around the price zone of 1.1520-1.1415.

This hindered further bearish decline which allowed the current bullish pullback to occur towards the price level of 1.2100 which failed to pause the ongoing bullish momentum as well.

Daily persistence above 1.2150-1.2200 confirms a bullish flag continuation pattern with projected targets towards 1.2500.

Otherwise, a bearish pullback may occur towards 1.2070 if a bearish breakout below 1.2160 is achieved on a daily basis.

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NZD/USD Intraday technical levels and trading recommendations for January 22, 2018

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Daily Outlook

In July 2017, an atypical Head and Shoulders pattern was expressed on the depicted chart which indicated upcoming bearish reversal.

As expected, the price level of 0.7050 failed to offer enough bullish support for the NZD/USD pair. That's why, further bearish decline was expected towards 0.6800 (Reversal pattern bearish target).

Evident signs of bullish recovery was expressed around the recent low (0.6780). An inverted Head and Shoulders pattern was expressed around these price levels.

The price zone of 0.7140-0.7250 (prominent Supply-Zone) failed to pause the ongoing bullish momentum. Instead, a bullish breakout above 0.7250 was expressed on January 11.

That's why, the current bullish movement extended towards the price levels of 0.7240 and 0.7320.

A quick bullish movement is expected towards the depicted supply zone (0.7320-0.7390) where price action should be watched for evident bearish rejection and a valid SELL entry.

Trade Recommendations:

Conservative traders should be looking for a valid SELL entry anywhere around the depicted supply zone (0.7320-0.7390).

S/L should be located above 0.7450. T/P levels should be located around 0.7230, 0.7150 and 0.7090.

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NZD/USD Intraday technical levels and trading recommendations for January 22, 2018

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Daily Outlook

In July 2017, an atypical Head and Shoulders pattern was expressed on the depicted chart which indicated upcoming bearish reversal.

As expected, the price level of 0.7050 failed to offer enough bullish support for the NZD/USD pair. That's why, further bearish decline was expected towards 0.6800 (Reversal pattern bearish target).

Evident signs of bullish recovery was expressed around the recent low (0.6780). An inverted Head and Shoulders pattern was expressed around these price levels.

The price zone of 0.7140-0.7250 (prominent Supply-Zone) failed to pause the ongoing bullish momentum. Instead, a bullish breakout above 0.7250 was expressed on January 11.

That's why, the current bullish movement extended towards the price levels of 0.7240 and 0.7320.

A quick bullish movement is expected towards the depicted supply zone (0.7320-0.7390) where price action should be watched for evident bearish rejection and a valid SELL entry.

Trade Recommendations:

Conservative traders should be looking for a valid SELL entry anywhere around the depicted supply zone (0.7320-0.7390).

S/L should be located above 0.7450. T/P levels should be located around 0.7230, 0.7150 and 0.7090.

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Daily analysis of major pairs for January 22, 2018

EUR/USD: The EUR/USD pair consolidated throughout last week, neither going above the resistance line at 1.2300 (which was tested unsuccessfully), nor going below the support line at 1.2150. This week, there is going to be a directional movement, which would most probably favor bears, for the outlook on EUR pair is bearish for this week.

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USD/CHF: This trading instrument went further bearish last week, testing the demand level at 0.9550 and then bouncing upwards on Friday. The demand level at 0.9550 would try to impede further bearish movement, and price could go upwards to reach the resistance levels at 0.9650 and 0.9700.

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GBP/USD: This GBP/USD pair is in a bearish mode. The shallow rally that was in the middle of last week, turned out to be a nice opportunity to go short. It is much more likely that price would continue going southwards this week, because there could be some weakness in USD. The demand levels at 110.50, 110.00, and 109.50 could be reached.

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USD/JPY: This pair is in a bearish mode (there is a Bearish Confirmation Pattern in the 4-hour chart). Irrespective of the upwards bounce that was seen in the middle of last week, price was able to go lower on Friday. This week, the demand level at 110.50 could be breached to the upside, and one of the reasons is because of the expected weakness in USD.

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EUR/JPY: This market was rough and choppy last week, but price kept trudging upwards. Since there is a Bullish Confirmation Pattern in the 4-hour chart, the market may be able to reach the supply zones at 136.50 and 137.00 this week (even exceeding the supply zone at 137.00). The outlook on certain JPY pairs is bullish for this week.

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Trading plan 22 - 01/26/2018

Trading plan 22 - 01/26/2017

The general picture: The market is waiting for the decision of the ECB.

The main event of the week is the ECB's decision on monetary policy, which will be released on Thursday.

Probably, the price will move sharply upward towards the level of 1.2500.

The opening of the week is mixed against the background of the budget crisis in the US. The price will more likely settle quickly but, in case that the crisis worsens, the euro can go down prominently.

GBP / USD pair:

The pound is held near the highs, which implies continuous growth.

Purchases should be made from the level of 1.3730.

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Technical analysis of GBP/USD for January 22, 2018

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Overview:

  • The GBP/USD pair set above strong support at the level of 1.3758, which coincides with the 61.8% Fibonacci retracement level. This support has been rejected for four times confirming uptrend veracity. Thus, major support is seen at the level of 1.3758 because the trend is still showing strength above it. Accordingly, the pair is still in the uptrend from the area of 1.3758 and 1.3840. The GBP/USD pair is trading in a bullish trend from the first support line of 1.3840 towards the first resistance level at 1.3944 in order to test it. This is confirmed by the RSI indicator signaling that we are still in the bullish trending market. Now, the pair is likely to begin an ascending movement to the point of 1.3944 and further to the level of 1.3939. At the same time, if a breakout happens at the support levels of 1.3840, then this scenario may be invalidated. But in overall, we still prefer the bullish scenario.
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Technical analysis of EUR/USD for January 22, 2018

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Overview:

  • On the four-hour chart, the EUR/USD pair bullish trend from the support levels of 1.2193 and 1.2092. Currently, the price is in a bullish channel. This is confirmed by the RSI indicator signaling that we are still in a bullish trending market. As the price is still above the moving average (100), immediate support is seen at 1.2193, which coincides with a golden ratio (78.6% of Fibonacci). Consequently, the first support is set at the level of 1.2193. So, the market is likely to show signs of a bullish trend around the spot of 1.2193/1.2200. In other words, buy orders are recommended above the level of 1.2200 with the first target at the level of 1.2323. Furthermore, if the trend is able to breakout through the first resistance level of 1.2323. We should see the pair climbing towards the double top (1.2323) to test it. It will also call for an uptrend in order to continue towards 1.2400. It would also be wise to consider where to place a stop loss; this should be set below the second support of 1.2193.
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Bitcoin analysis for 22/01/2018

Bitcoin is under intense supervision on Bali - an island in the Indonesian archipelago. Central Bank officials are trying to solve the cryptocurrencies of the country. Causa Iman Karana, head of the Indonesian Bank's representation in Bali, said: "We have learned from some social media entries that Bali has become a haven for bitcoin transactions, and the next step will be to ban them in accordance with the law. That's why we ask people not to use the cryptocurrency anymore. A special criminal investigation unit will enforce the principle that all transactions in Indonesia are to be made by rupees".

The country was previously reported as having significant local consent to the use of Bitcoin, but recent reports indicate that the government is trying to limit the use of digital currencies. The risk of money laundering and criminal activity has led to increased control. Severe rhetoric against Bitcoin and other cryptocurrencies in Bali, in the eastern region is more reminiscent of China or South Korea, and more so than the milder and more open Australia.

Let's now take a look at Bitcoin technical picture at the H4 time frame. The market managed to break out above the resistance at the level of $12,737 and fall back down towards the consolidation zone again. Currently, the price is hovering around the weekly pivot at the level of $11,440 so the bias remains neutral so far. The nearest technical support is seen at the level of $9,196 and if the correction in wave (4) is completed, the market should move higher towards the level of $12, 737 and beyond.

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Trading plan for 22/10/2018

The US Dollar suffered shortly due to a lack of agreement in the US Congress regarding the extension of budget financing, which stopped the work of public administration. Similarly, EUR does not feel the reaction of the SPD delegates to the coalition with the CDU. After the broad market, there is no increase in risk aversion, as stock exchanges are growing.

On Monday, 22nd of January, the event calendar is very light with important economic releases. The only data worth attention is the Wholesale Sales report from Canada and Bundesbank Monthly Report from Germany.

EUR/USD analysis for 22/01/2018:

The weekend session in the US Senate ended without a vote on the extension of funding for government institutions. As a result, the government shutdown continues. The deadline expired on Friday at midnight. Nevertheless, USD makes up for the initial losses, because the market believes that the government shutdown will not last long and will have marginal consequences for the economy.

Let's now take a look at the EUR/USD technical picture on the H4 time frame. EUR/USD opened with a gap up at 1.2266, but in the following hours it returned to levels from Friday's close at 1.2220. Currently, the market is still consolidating the recent gains and the consolidation zone is located between the levels of 1.2155 - 1.2321. Any breakout above the golden channel line will be the first clue of a possible rally towards the swing high. The overall bias remains bullish and new highs should be seen soon.

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Market Snapshot: SPY makes a new marginal higher high

The price of SPY (SP500 EFT) has made a new marginal higher high at the level of 280.35 in overbought market conditions. The golden trend line is still holding the price nicely, but the momentum indicator shows a growing divergence between the price and momentum. It might be a first clue that the correction is coming soon.

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Market Snapshot: DAX is closer to the recent highs

The German DAX Index is getting closer to the recent swing high at the level of 13,515. Nevertheless, the momentum is still weak on the move up, so there is a possibility of a Double Top pattern or other technical pattern that might be a trend reversal worth to keep an eye on.

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Bitcoin analysis for January 22, 2018

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The Bitcoin (BTC) has been trading sideways at the price of $11.675. The South Korean government has announced that six major banks will be ready to provide services to cryptocurrency exchanges this month. Under the new system, the government requires exchanges to share user data with banks. The technical picture is neutral to bearish.

Trading recommendations:

According to the 30M time - frame, I found bearish pennant in the creation and my advice is to watch for potential selling opportunities if you see a valid breakout of support. The downward targets are set at the price of $10.480 and at the price of $9.249.00.

Support/Resistance

$11.841 – Intraday resistance

$11.325– Intraday support

$10.479 – Objective target 1

$9.249 – Objective target 2

With InstaForex, you can earn on cryptocurrency's movements right now. Just open a deal in your MetaTrader4.

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Analysis of Gold for January 22, 2018

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Recently, Gold has been trading sideways at the price of $1,331.00. According to the 30M time - frame, I found successful rejection of the upward trendline (support), which is a sign that selling looks risky. I also found a potential bullish flag in progress and a hidden bullish divergence on the stochastic oscillator, which is another sign of strength. My advice is to watch for potential buying opportunities. The first upward target is set at the price of $1,337.00.

Resistance levels:

R1: $1,337.66

R2: $1,343.75

R3: $1,349.40

Support levels:

S1: $1,325.89

S2: $1,320.22

S3: $1,314.12

Trading recommendations for today: watch for potential buying opportunities.

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GBP/USD analysis for January 22, 2018

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Recently, the GBP/USD pair has been trading sideways at the price of 1.3890. According to the 30M time - frame, I found a confirmed intraday reversal head-and-shoulders formation, which is a sign that selling looks risky. I also found a breakout of the pivot level at the price of 1.3880, which is another sign of strength. My advice is to watch for potential buying opportunities. The upward targets are set at the price of 1.392 and at the price of 1.3985.

Resistance levels:

R1: 1.3922

R2: 1.3985

R3: 1.4029

Support levels:

S1: 1.3815

S2: 1.3773

S3: 1.3708

Trading recommendations for today: watch for potential buying opportunities.

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Ichimoku cloud indicator analysis of USDX for January 22, 2018

The Dollar index remains in a bearish trend. Price remains below the important short-term cloud resistance at 91 and as long as we are below it, we should expected more downside ahead. The weekly candle however gives some hopes to bulls with a bullish reversal hammer pattern.

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Black rectangle - resistance

The Dollar index cannot overcome the resistance at the 91 level. This is the most important short-term level. Only a break above it will push price towards the next important resistance of 93. Support is at 90.40 and next at 90.20.

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Blue line - long-term resistance

Weekly trend remains bearish. The Dollar index made a weekly bullish hammer candlestick pattern last week and if bulls manage to break above last week's high, we could see the start of a bigger bounce at least towards the blue trend line resistance at 93. As long as we are below 91, there will be no reversal confirmation.

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Ichimoku cloud indicator analysis of gold for January 22, 2018

Gold is making lower lows and lower highs since the high of $1,345 in the 4-hour chart. Trend remains bullish though as price continues to hold above the 4-hour Kumo (cloud).

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Red lines - bearish divergence

Green line - important support

Black line- short-term resistance

Gold price is trading right above the Kumo (cloud) in the 4-hour chart. Price is testing cloud support. Short-term support is at $1,325 and resistance at $1,337. A break below $1,235 could push price towards the green line support at $1,309. A break below the cloud will change trend to bearish for the short-term.

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Magenta line -long-term resistance

The weekly candle implies the rejection was not very strong but price was rejected and we could see another lower weekly candle this week. Price has weekly support at $1,290 and next at $1,250. I'm bearish Gold. Key support is at $1,309, break it and we are off to $1,290-$1,250.

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US dollar: Step towards default

Supporters of the bill on temporary financing of the US government could not get the required number of votes on Friday, and for the first time since 2013, US federal agencies stop working because of a lack of funding. Supporters of the bill failed to gain the necessary 60 votes to put the matter to a final vote, as Republicans and Democrats did not reach an agreement on immigration.

The lack of an agreement came as a surprise to the markets, as none of the political parties is interested in stopping the work of the government, since such a measure is very unpopular with voters. It was assumed that a temporary solution would be adopted for several days, during which the parties would try to come to an understanding, but these hopes were not realized.

The suspension of the work of the government is not connected with the problem of public debt. The US Treasury can still issue state bonds due to the adoption of so-called "extraordinary measures", within which non-market debt (that is, government debt) and commodity debt (non-government) may vary, with a general unchanged amount. Emergency measures will be exhausted in the spring, and if by that time no solution is found, the US will default on its debts.

How does the current situation threaten the dollar? In 2013, the work of the government was suspended for 17 days, at which time the level of consumer confidence dropped sharply.

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The loss in confidence, in turn, if it drags on, threatens to reduce consumer activity and, as a consequence, a decrease in the level of inflation, a decrease in GDP growth rates and revenues to the budget. All these factors can have a very negative impact on the plans of the Trump administration on budget reform.

The consumer confidence index from the University of Michigan is already decreasing instead of the expected growth. The preliminary value in January came in at 94.4 against 95.9 a month earlier and against the forecast of 97.0 p, primarily this result is associated with abnormally cold weather in much of the US territory, however, regardless of the reasons, the threat of a slowdown in GDP growth is already high.

The main attention next week will be focused on the political aspects, as for macroeconomic factors, then there will be important releases and they will not have a noticeable impact on the dollar quotes. On Wednesday, preliminary business activity data from Markit will be published, already within six months the production index lags significantly behind the similar ISM index. The gap should somehow be closed, and therefore the probability of improving the indices will give some support to the dollar, expectations at the moment at 55.8 p against 55.1 in December.

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On Friday, the first preliminary estimate for GDP growth in the fourth quarter will be published, and the situation in this regard is rather optimistic. According to GDPNow from the Federal Reserve Bank of Atlanta, the growth in 2017 was 3.2% A similar estimate from the Federal Reserve Bank of New York (NY Fed GDP Nowcast) indicate 3.9% growth. Perhaps at the moment this is the main factor that can support the dollar. Growth may be the strongest in the last three years, and, of course, attention will be directed to the dynamics of capital investments in December, and expectations are also positive.

Overall, the prospects for the dollar would be good, if not for a permanent political crisis. Next week, the ECB and the Bank of Japan will hold their meetings. The market does not expect any changes in monetary policy, which usually leads to an increase in interest in risk, and the dollar against this background could play a part of the losses. However, the confident projections of the government's default introduces strong changes in expectations, the dollar will remain under pressure and the chances for a resumption of growth are significantly reduced.

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Germany decides the fate of the euro

Eurozone

While the United States is shaking with political storms, the eurozone is confidently moving towards economic prosperity. In any case, such a conclusion is quite appropriate against the background of improving the majority of macroeconomic indicators. The balance of the current account reached a trade surplus of 32.5 billion euros in November, along with an increase in all indicators, except for secondary income.

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The eurozone and especially Germany have traditionally been criticized for too much trade surplus. The head of the IMF, Lagarde, said on Friday that the IMF was worried about the current situation, and a decrease in Germany's surplus would reduce global disparities. Lagarde calls for lowering the surplus by increasing imports and domestic spending, which is equivalent to the proposal to contribute to the growth of the euro.

The head of the Bundesbank Weidmann is strongly opposed to this approach, because, in his opinion, the aging of the German population will lead to an increase in domestic spending, and therefore one should not try to "help the neighbors" in this way.

On January 25, the ECB will hold a regular meeting on monetary policy, the markets do not expect any changes, and announcement of the date for the completion of the asset repurchase program is expected not earlier than March, as in January there will be no publication of updated macroeconomic forecasts. At the same time, a more aggressive tone of Mario Draghi's comments is possible, which is interested in somewhat limiting the demand for the euro.

On Tuesday, ZEW's report on moods in the business area of the eurozone will be published, the outlook is positive, and the euro can get support. On Wednesday - the forecast for PMI Markit indices is also positive. On Monday, the euro could take a pause to form a new driver for growth, quotes will remain, most likely, in the trading range of 1.2092/1.2323.

There may be disruption in plans from unexpected results of voting in Germany by the SPD this Sunday on the agreement on the government coalition. In case of a negative outcome of the vote, the euro may open with a gap in trading on Monday and go below 1.20.

United Kingdom

Despite confidently positive forecasts, instead of the expected growth, retail sales in December for 2017 showed a decline in volumes, with the cumulative growth only 1.4%. In December there was a decrease of 1.5% compared to November, despite the usual growth for this month due to Christmas sales.

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Retail data show that the increase in consumer inflation, which is declared to be the reason for the Bank of England to raise the rate, does not really have any solid ground and is caused solely by the appreciation of imports due to the fall of the pound after Brexit. The Bank of England, thus, raised the rate not to curb inflation, but to create a positive background in the struggle for financial flows between London and Brussels.

On Wednesday, a report on the labor market will be published and according to majority of estimates, there are signs that employment is no longer growing at the same rate and will remain at 4.3% or even fall to 4.4%. As for the growth of average wages, the forecast is a decline to 2.2%, which may lead to selling of the pound if the forecasts are confirmed.

On Friday, the first preliminary estimate of GDP in the fourth quarter is expected. According to PMI, the growth should be in the range of 0.4% -0.5%, but NIESR recently forecasted a 0.6% growth, and therefore the data can exceed the market's expectations.

The pound has made notable progress, recovering all losses after Brexit, the momentum is still strong, and if it is supported by a report on the labor market, the pound will be able to gain a foothold above 1.40. Growth is supported by the demand for risk and the fundamental weakness of the dollar, which is increasingly difficult to conceal.

Oil

Oil somewhat slowed down its rally and the correction on Brent allowed the quotes to drop below $ 68/bpd, but there are still no reasons for a deeper decline. Corrective sentiment can prevail if markets do not find an additional driver for growth, until such is found and trade goes to the lateral range.

IEA predicts a sharp increase in the production of shale oil in the US due to rising prices, but there is no evidence of increased investment in the industry. With regards to Russia, the IEA notes a noticeable increase in revenues, even as output declines.

While market participants are looking for a new driver, the oil goes into the lateral range, but the resumption of attempts to update the highs at this stage looks a little more likely.

The material has been provided by InstaForex Company - www.instaforex.com