Inflation in the eurozone is lagging behind the ECB's target, which may complicate the rate increase

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Inflation slowed more than expected in December and was further away from the ECB target, reinforcing forecasts that interest rates might not rise this year.

According to Eurostat, prices in the eurozone in December increased by 1.6 percent compared to the same period last year, down from 1.9 percent in November. Inflation was constrained by a sharp slowdown in energy prices. The unexpected drop in inflation below the ECB target complicates plans for a possible increase in interest rates. Recall, the regulator promised in December to keep rates at current record-low levels, at least until next summer and did not try to change market expectations that the first increase in interest rates would occur only in early 2020. The December figures reinforced the view that it is not expected to increase this year.

Immediately I recall the recent statement by the ECB official Benoit Coeure that interest rates will remain low until inflation reaches its goal. While there is no reason for this. Although the recent acceleration in wage growth might well have been, fears that inflation in the energy sector is likely to continue to decline, overall inflation is likely to fall to about 1 percent by the middle of the year.

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US employment growth is likely to accelerate, how will the Fed respond?

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One of the most anticipated reports for the forex market is the US Employment Report. In anticipation of this data, experts predict that in December, the growth rate of employment in the US probably accelerated. In addition, it is expected that wages will increase significantly. All of this may help mitigate the recent surge in concerns about the state of the economy.

So far there is not a lot of good news, recent reports showed a sharp decline in consumer confidence and manufacturing activity last month and were regarded as clear signs that economic growth is losing momentum. It is hoped that the new data will be more positive. Economists predict that last month, the number of jobs in the non-agricultural sector probably increased by 177,000, after rising by 155,000 in November. If the forecast comes true, this will be good news for financial markets amid growing concern that the economy will slow down significantly in 2019. As for wages, the average hourly earnings are likely to grow by 0.3 percent in December, after rising 0.2 percent in November. Unemployment is projected at a 49-year low of 3.7 percent.

A strong employment report could force the Fed to continue its interest rate hike this year, further aggravating differences with Wall Street and Trump, who repeatedly criticized the Fed and Jerome Powell personally for raising rates. Financial markets do not predict a rate hike in 2019. The latest signal that investors do not see opportunities for further rate hikes was the fall in the yield on 2-year US Treasury bonds, which on Thursday fell below the Fed's discount rate for the first time in more than a decade.

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Fractal analysis of major currency pairs on January 4

Dear colleagues,

For the Euro/Dollar pair, the price is in the adjustment area of the downward structure on January 2, The key support level is at 1.1430. For the Pound/Dollar pair, the price is in the correction area of the downward structure on December 31, the key support level is 1.2700. The Dollar/Franc pair forms the initial conditions for the upward cycle of December 28. The development of this structure is expected after the breakdown of 0.9926. The Dollar/Yen pair is following the formation of the ascending structure of January 3 on the M30 scale. The Euro/Yen pair forms the upward structure of January 3 and the subsequent development of which is expected after the breakdown of 123.74. The Pound/Yen pair is following the formation of the ascending structure of January 3.

Forecast for January 4:

Analytical review of H1-scale currency pairs:

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For the Euro/Dollar pair, the key levels on the H1 scale are 1.1430, 1.1394, 1.1336, 1.1298, 1.1259, 1.1194 and 1.1148. Here, we are following the formation of the downward structure of January 2. At the moment, the price is in the correction zone. Continuation of the downward movement is expected after the breakdown of 1.1336, which in this case the first target is 1.1298. A short-term downward movement is possible in the range of 1.1298 – 1.1259 and the breakdown of the latter value will lead to the development of a pronounced movement. Here, the goal is 1.1194. The potential value for the bottom is considered the level of 1.1148, and upon reaching, we can expect a rollback to the top.

A short-term upward movement is possible in the range of1.1394 – 1.1430. The breakdown of the latter value will lead to the formation of an upward structure, in this case the potential target is 1.1496.

The main trend is the formation of potential for the bottom of January 2.

Trading recommendations:

Buy 1.1435 Take profit: 1.1480

Buy-Take profit:

Sell: 1.1336 Take profit: 1.1300

Sell: 1.1297 Take profit: 1.1260

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For the Pound/Dollar pair, the key levels on the H1 scale are 1.2699, 1.2638, 1.2549, 1.2490, 1.2402, 1.2336, 1.2254 and 1.2200. Here, we are following the development of the downward structure from December 31. At the moment, the price is in the area of correction. A downward movement is expected after the breakdown of 1.2549, in this case the first target is 1.2490. The breakdown of which will lead to a pronounced movement to the level of 1.2402, ranging at 1.2402 - 1.2336 for short-term downward movement. The breakdown of the level of 1.2254 will lead to a pronounced movement to the level of 1.2254. The potential value for the bottom is considered the level of 1.2200, and upon reaching, we can expect a departure to a correction.

Short-term upward movement is possible in the range of 1.2638 – 1.2699. The breakdown of the latter value will have an upward trend. Here, the potential target is 1.2813.

The main trend is the downward structure of December 31, in the stage of correction.

Trading recommendations:

Buy: 1.2640 Take profit: 1.2695

Buy: 1.2710 Take profit: 1.2770

Sell: 1.2549 Take profit: 1.2495

Sell: 1.2490 Take profit: 1.2410

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For the Dollar/Franc pair, the key levels on the H1 scale are 1.0019, 0.9970, 0.9950, 0.9926, 0.9854, 0.9836, 0.9813 and 0.9786. Here, the price forms the initial conditions for the top of December 28. The development of the ascending structure is expected after the breakdown of 0.9926, which in this case the target is 0.9950 in the range of consolidation at 0.9950 - 0.9970. The potential value for the top is considered the level of 1.0019, which we can expect after the breakdown of 0.9970.

A short-term downward movement is possible in the range of 0.9854 – 0.9836. The breakdown of the latter value will lead to a prolonged correction. Here, the goal is 0.9813. This level is a key support for the upward structure.

The main trend is the formation of the initial conditions for the top of December 28.

Trading recommendations:

Buy: 0.9926 Take profit: 0.9950

Buy: 0.9970 Take profit: 1.0010

Sell: 0.9854 Take profit: 0.9838

Sell: 0.9834 Take profit: 0.9815

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For the Dollar/Yen pair, the key levels on the scale are 109.30, 108.95, 108.46, 107.61, 107.33, 106.99 and 106.63. Here, we are following the formation of the ascending structure of January 3 on the scale of M30. The continuation of the upward movement is expected after the breakdown of 108.46, which in this case the target is 108.95, near the consolidation level. The potential value for the top is considered the level of 109.30, from which we can expect a downward rollback.

A short-term downward movement is possible in the range of 107.61 – 107.33 and breakthrough in the last value will lead to in-depth correction. Here, the goal is 106.99, which is the key support level for the top.

The main trend is the formation of the ascending structure of January 3.

Trading recommendations:

Buy: 108.46 Take profit: 108.90

Buy: 108.97 Take profit: 109.30

Sell: 107.60 Take profit: 107.40

Sell: 107.30 Take profit: 107.00

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For the Canadian dollar/ US Dollar pair, the key levels on the H1 scale are 1.3589, 1.3543, 1.3516, 1.3421, 1.3395 and 1.3320. Here, we are following the formation of the downward structure of December 31. At the moment, we expect a move to the level of 1.3421 in the range of 1.3421 - 1.3395 for short-term downward movement. Hence, the probability of going into a correction. The breakdown of the level of 1.3395 should be accompanied by a pronounced move towards the potential target at 1.3320.

Short-term upward movement is possible in the range of 1.3516 – 1.3543. The breakdown of the latter value will lead to a deep correction. Here the target is 1.3589 which is the key support level for the downward structure. At the moment, we expect a move to the level of 1.3421 in the range of 1.3421 - 1.3395 for short-term downward movement. Hence, the probability of going into a correction. The breakdown of the level of 1.3395 should be accompanied by a pronounced move towards the potential target at 1.3320.

The main trend is the formation of a downward structure of December 31.

Trading recommendations:

Buy: 1.3516 Take profit: 1.3540

Buy: 1.3545 Take profit: 1.3576

Sell: 1.3421 Take profit: 1.3395

Sell: 1.3390 Take profit: 1.3325

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For the Australian dollar/US dollar pair, the key levels on the H1 scale are 0.7153, 0.7084, 0.7059, 0.7034, 0.6990, 0.6963 and 0.6925. Here, we are following the ascending structure of January 3. A short-term upward movement is expected in the rang of 0.7034 – 0.7059. The breakdown of the latter value will lead to the movement to the level of 0.7084, which is near the consolidation level. For now, the potential value for the top is considered to be the level of 0.7153, which we can expect after the breakdown of 0.7090.

A short-term downward movement is possible in the range of 0.6990 – 0.6963. The breakdown of the latter value will lead to a prolonged correction. Here, the target is 0.6925, which is the key support level for the upward structure.

The main trend is the ascending structure of January 3.

Trading recommendations:

Buy: 0.7034 Take profit: 0.7055

Buy: 0.7060 Take profit: 0.7082

Sell: 0.6990 Take profit: 0.6965

Sell: 0.6960 Take profit: 0.6935

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For the Euro/Yen pair, the key levels on the H1 scale are 125.15, 124.22, 123.74, 122.65, 122.29, 121.68 and 120.76. Here, we follow the formation of the ascending structure from January 3. A short-term upward movement is possible in the range of 123.74 – 124.22. The breakdown of the latter value will lead to a pronounced movement to the potential target of 125.15, from this level we can expect a downward rollback.

Short-term downward movement is possible in the range of 122.65 - 122.30, the breakdown of the latter value will lead to a prolonged correction, here the goal is 121.70, which is the key support level for the upward structure.

The main trend is the formation of the ascending structure of January 3.

Trading recommendations:

Buy: 13.74 Take profit: 124.20

Buy: 124.25 Take profit: 125.15

Sell: 122.65 Take profit: 122.30

Sell: 122.26 Take profit: 121.80

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For the Pound/Yen pair, the key levels on the H1 scale are 139.49, 138.07, 137.08, 135.68, 135.18, 134.26 and 132.84. Here, we follow the formation of the ascending structure from January 3. An upward movement is expected after the breakdown of 137.08, in this case, the target is 138.07, which is near the consolidation level. A breakout at 138.10 should be accompanied by a pronounced upward movement to the potential target of 139.49, which is near the consolidation level.

A short-term downward movement is possible in the range of 135.68 – 135.18. The breakdown of the latter value will lead to in-depth correction. Here, the goal is 134.26, which is the key support level for the top.

The main trend is the formation of the ascending structure of January 3.

Trading recommendations:

Buy: 137.10 Take profit: 138.00

Buy: 138.10 Take profit: 139.40

Sell: 135.68 Take profit: 135.20

Sell: 135.12 Take profit: 134.50

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Fed 2019: who has the right to vote this year?

Every year, there is a rotation among the Fed members who have the right to vote in the Committee on operations on the open market. This process is closely monitored by traders, as the strengthening of the "dovish" or "hawkish" wing, which as a rule influences the determination of the voiced rhetoric. In the context of evaluating the prospects of monetary policy, this circumstance is important, especially now that the question of raising interest rates was practically hung in the air. Of course, the position of the members of the Federal Reserve may change depending on external circumstances - but still, nobody canceled the "personal factor". Therefore, I propose to consider each of them.

First of all, it should be noted that the composition of the Governing Council, which has a permanent right to vote, has not changed. They are Fed Chairman Jerome Powell, John Williams, Lael Brainard, Richard Clarida, Randal Quarles, and Michelle Bowman. None of them resigned, so they continue to fulfill their duties within the framework of their 14-year term. But as for the "newcomers", their faces are also well known to us despite the fact that last year they did not have the right to vote at the Fed. These regulators often spoke on a public plane, assessing certain events. As a rule, their rhetoric had little influence on the market, since they did not directly participate in the formation of monetary policy, but merely commented on the current situation. They were considered only as a source of information regarding the general sentiment in the Fed. But since January 30, when the first meeting of the Fed will take place this year, these officials will have the right to vote, after which their word will be "worth its weight in gold." So who are we talking about?

Hence, in the coming year, Committee members who have the right to vote in the Fed will be Charles Evans (FRB Chicago), Eric Rosengren (FRB of Boston), James Bullard (FRB of St. Louis) and Esther George (FRB of Kansas City). In turn, the following members of the regulator are deprived of the right to vote namely, Loretta J. Mester (Cleveland), Mary C. Daley (San Francisco), Raphael W. Bostic (Atlanta) and Thomas Barkin (Richmond).

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What do we know about the position of those who gained the right to vote in the Fed format in 2019? For example, the head of the Federal Reserve Bank of Chicago, Charles Evans, has always been considered the representative of the "dovish" wing. But last fall, he made an unexpected statement that the regulator should increase interest rates above the neutral level in order to "keep the economy on the path of sustainable growth and inflation in the area of the target mark". In early December, he again stated his opinion saying, "the time has come to bring monetary policy to neutral, as current data emphasizes the strength of the US economy." Given this rhetoric, it cannot be attributed to the "dovish", although he has not yet voiced his position after a series of negative American releases.

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But in the situation with James Bullard, who heads the Federal Reserve Bank of St. Louis, the situation is reversed. For a long time, he defended a fairly tough position, consistently advocating a gradual (but sure) increase in interest rates. However last summer, he unexpectedly urged the Fed to stop tightening monetary policy. He explained his opinion for several reasons. First, it is the weakening of the inflationary pressure, and secondly, the inversion of the yield curve. According to him, the Fed should not act "ahead of the curve" as this can aggravate the already difficult situation. It is worth noting that since the US inflation has further slowed down, it is unlikely that he revised his position in the direction of tightening.

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Another member of the Fed, who has the right to vote this year, Eric Rosengren, is a supporter of a tight monetary policy. In his opinion, the process of raising interest rates is a form of insurance against overheating of the American economy. Back in 2013, he advocated an early reduction in incentives, and on the eve of 2018, he said it was necessary to raise the rate four times. But in each case, he appealed to the increase in price pressure in the country, whereas now, the reverse process is observed. Therefore, Rosengren may also reconsider his opinion. Although of all the above, he is the most ardent supporter of the hawkish position.

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Well finally, Esther George, who heads the Federal Reserve Bank of Kansas City, (Personally, I remember it as a phrase voiced in 2016) says, it is better for the regulator to raise the rates earlier than later". This phrase amply describes its position regarding the prospects of monetary policy. In addition, Esther George last year made a public statement to the president of the United States, reminding him of the independence of the American Central Bank. At the same time, he confirmed the Fed's plans to raise the discount rate twice this year. Back in summer, a statement was made. But here it should be noted that it has taken a more moderate position recently. According to her, the rate can "go up to three percent" with time, but she also does not see the need to accelerate the pace of its increase.

Thus, the "recruits" in the ranks of the voters are unlikely to change the overall mood of the regulator. As you can see, yesterday's "dovish" tightened their rhetoric while the recent "hawks" are fighting for the suspension of monetary policy tightening. All these suggest that the Fed will make situational decisions in 2019 based on the dynamics of key macroeconomic indicators.

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US stocks fell sharply amid falling Apple shares

After reducing Apple's revenue forecast, the US stocks fell today. Representatives of the company noted a slowdown in economic growth in China, which heightens fears that the world economy may slow down significantly as a result of a trade war. The weaker-than-expected data on business activity in the US manufacturing sector only heightened these concerns. The ISM Manufacturing index fell to 54.1 points in December from 59.3 points in November, which was a minimum in more than two years.

Thus, the Dow Jones Industrial Average fell by 2.83% to 22,686.22 points. The S&P 500 lost 2.48% as it dropped to 2,447.89 points.

The iPhone manufacturer's stock has collapsed by almost 10% since the beginning of the year, which was the worst result for the company since 2013. As previously reported, Apple Inc. lowered its quarterly revenue forecast from $ 89-93 billion to $ 84 billion for the first time in almost 20 years. As a result, the shares of chip makers Advanced Micro Devices, Nvidia, Skyworks, and Qorvo also fell after Apple's forecasts.

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The Fed admits the possibility of suspending a rate hike

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Representatives of the Federal Reserve System (FRS) of the United States doubt the advisability of further tightening monetary policy amid growing volatility in financial markets and a possible slowdown in the US economy.

Robert Kaplan, President of the Federal Reserve Bank of Dallas, admits the possibility of abandoning interest rate increases in the first half of 2019. According to the official, the Fed should postpone the strengthening of monetary policy in the first quarters of the coming year. The reason for this R. Kaplan considers the increase in volatility in global financial markets and uncertainty about the US economy.

The expert draws attention to three key problems that demonstrate the state of affairs in the global market: slowing global growth, tightening financial conditions and expanding credit spreads. These factors have a negative effect on financial markets, and another interest rate increase may aggravate the situation. The head of the Federal Reserve Bank of Dallas is confident that no action should be taken on interest rates until current problems are resolved. "We should be patient and see how the situation develops. We should not rush to increase the rate during the first few quarters of this year," summed up R. Kaplan

At the end of 2018, at the last meeting of the Federal Committee for Open Market Operations (FOMC), representatives of the department worsened forecasts for a possible rise in interest rates in 2019. After the collapse of US stock indices, the majority of market participants expect to suspend the policy of raising rates in the coming year.

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EUR: Euro trades did not change amid slowing inflation

In the first half of the day, a report on the preliminary consumer price index of France was also published which grew by only 0.02% in December compared to November as compared to the increase of 1.6% in the same period of 2017.

The preliminary annual consumer price index of France harmonized by EU standards reached the level of 1.9% in December against 2.2% in November.

Annual inflation in eurozone dropped sharply in December last year. This happened against the background of a slowdown in the region's economy, which may affect the plans of the European Central Bank regarding interest rates.

Let me remind you that in December last year, the ECB completed a quantitative easing program, announcing that the target level of inflation has been achieved over the next few years.

As indicated in the report of the European Central Bank, the eurozone's CPI grew by only 1.6% in December 2018 compared with the same period of the previous year. In November, the growth was 1.9%. Economists expected a slowdown in consumer price growth to only 1.8% in December.

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The main slowdown in inflation is also associated with a decrease in energy prices, which significantly subsided in the 4th quarter of last year. Excluding such volatile categories, the core inflation remained at 1.0%.

Today, a report was also published on the Eurozone service industry, where it was pointed out that growth was slowing. According to the data, the PMI Purchasing Managers Index for the Eurozone services sector fell to 51.2 points in December from 53.4 points in November. Economists expected a drop in the indicator to 51.4 points.

The only positive news that preserved confidence in the growth of the euro in the near future, was the report on the German labor market, showing its strength as the number of applications for unemployment benefits decreased, while the unemployment rate remained at a record minimum.

According to the Federal Employment Agency, the number of applications for unemployment benefits decreased by 14,000 in December of this year compared to November while economists expected a contraction of only 10,000. The unemployment in Germany remained at 5.0%.

As for the technical picture of the EUR / USD pair, it remained unchanged compared with the morning forecast. Only a break of 1.1420 resistance can lead to a larger uptrend, reaching the highs of 1.1450 and 1.1490. In the case of a downward correction, a good level for euro purchases will be the area of 1.1345.

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Intraday technical levels and trading recommendations for EUR/USD for January 4, 2019

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On the weekly chart, the EUR/USD pair is demonstrating a long-term Head and Shoulders reversal pattern where the right shoulder is currently in progress.

On the Daily chart, the pair has been moving sideways with slight bearish tendency. Narrow sideway consolidations have been maintained within the depicted daily movement channel since June 2018.

On November 13, the EUR/USD demonstrated recent bullish recovery around 1.1220-1.1250 where the lower limit of the channel as well as the depicted demand zone came to meet the pair.

Bullish fixation above 1.1420 was needed to enhance further bullish movement towards 1.1520. However, the market has demonstrated significant bearish rejection around 1.1420 few times so far.

That's why, the EUR/USD pair has been trapped below the price level of 1.1420 waiting for bullish breakout since November 5.

Today, another attempt of bullish breakout above 1.1420 is being executed. Bullish persistence above 1.1420 enables further bullish advancement towards 1.1520 (the upper limit of the daily channel) and 1.1600 (October's High) as initial targets.

On the other hand, any bearish decline below the key-level of 1.1420 brings more sideway consolidations down to 1.1260 again.

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US national debt increased more than $2 trillion during Trump's reign

According to the US Treasury, the national debt of the country grew by more than $2 trillion during the presidency of Donald Trump, who took over as head of state in 2016. For a little over 2 years, the national debt increased to $ 21.974 trillion.

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As is known, the national debt of the United States began to grow after the 2008 financial crisis, and after Donald Trump came to power, the national debt decreased. At the end of 2017, it became $19.899 trillion. However, the introduction of tax reform in the country's economy in 2017 led to the fact that the national debt indicators began to grow sharply again and reached $21.974 trillion by the end of 2018.

At the moment, the US national debt is 78% of the country's GDP, which has become the highest figure since 1950. Analysts predict that if the US government does not find effective ways to deal with growing government debt, the numbers could rise to 96% of GDP.

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The dollar never ceases to amaze

Curious things happen on Forex! At the end of last year, the number of "bears" in the dollar among large banks was growing rapidly. They justified their pessimistic forecasts by slowing the US economy and a long pause in the process of normalizing the Fed's monetary policy. At the beginning of 2019, these factors are acutely felt, but the EUR / USD pair is not in a hurry to the north. The "American" is losing ground, except against safe-haven assets, while it feels confident against European G10 currencies. What is the matter? Wrong forecasts? Or their hour has not come yet?

Apple's reference to weak demand for the company's products in China and the most rapid peak of the US manufacturing activity index over the past decade were the first news of a potential slowdown in US GDP. A leading indicator from the Atlanta Federal Reserve Bank shows that in the fourth quarter, the economy will slow down from 3.4% to 2.2% q / q, which forces investors to buy treasury bonds. As a result, yields on 1, 2, and 5-year debt have fallen below the effective federal funds rate. The market is beginning to require the Fed to ease monetary policy.

Dynamics of bond yields and Fed rates_qP5bmsdgN0Bq2XFWqO_ZwkguyB3sc3NCQam4jicThe same thing happens with CME derivatives, the dynamics of which are commonly interpreted as expectations of changes in the Fed's monetary policy. If a month ago the chances of raising the rate from 2.5% to 2.75% at the March meeting of the FOMC exceeded 40%, then at present they have fallen to zero. Investors are confident that the Fed at the end of the first quarter will not adjust the number of borrowing costs. Moreover, the derivatives market ceased to believe in the continuation of the normalization cycle in 2019 and provide a more than 40% chance of reducing the rate by 25 bp. during a year.

Dynamics of the likelihood of a Fed rate hike in MarchkXp56I2T9Ysj21W9TydJo7kLsCjWhZvU6pTfbx2AIn such conditions, the stability of the dollar looks amazing. Yes, it collapsed against the yen, but in this case, there was a thin market during the holidays and large-scale operation of stop orders, I mean technical factors. It is likely that investors do not have enough weak statistics on the US labor market for December and Jerome Powell's "pigeon" comments in order to force the EUR / USD quotes above the important resistance by 1.1485.

You can, of course, talk about the weakness of the euro. Data on business activity in France and Spain disappointed, the dynamics of inflation in the currency bloc has long left much to be desired, and the ECB begins the process of reinvesting income from matured bonds on the balance sheet. The Central Bank is not ready to completely abandon the policy of cheap money, and the increase in rates by forks on water was written. The situation is aggravated by the resuscitation of the hard problem of Brexit, which significantly complicates the life of not only the pound but also the single European currency.

Technically, the idea of a downtrend reversal is still relevant due to the implementation of the combination of the "Three Indians" and "Splash and Regiment" patterns. The breakthrough of the upper limit of the consolidation range of 1.1265-1.1485 ("shelves") activates the harmonious trading model Bat with a target of 88.6%.

EUR / USD, the daily chart

ZkjlzdrUNmTykQLDndKPDwv0YbIagqoiW_v3dmocThe material has been provided by InstaForex Company - www.instaforex.com

Forecast for EUR / USD pair on January 4, 2019

On Thursday, the euro decided to bring the correction to end, that is to possibly move towards strong technical resistance levels, which turned out to be the price channel line on the daily scale chart and the MACD trend indicator line on the four-hour chart. this morning's turn from the MACD line coincides with the downward turn of the Marlin oscillator from the zero line. It can be assumed that growth has been completed on this, especially with the expectation of strong US employment data. Yesterday's data on jobs in the private sector from ADP showed an increase of 271 thousand in December, which is an extremely high figure for the month compared to the forecast of 179 thousand. It collapsed from 59.3 to 54.1. The American media found the cause to be the slowdown of the Chinese economy. The forecast for today's Non-Farm Employment Change is 179 thousand versus to the earlier 155 thousand. We are waiting for the decline of the euro to 1.1307 and further in the range of 1.1270 / 85.

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Forecast for GBP / USD pair on January 4, 2019

GBP / USD pair

Yesterday's correctional growth of the British pound took place against the background of a weakened Construction PMI, indicating the business activity in the construction sector. The December figure fell from 53.4 to 52.8. Perhaps the reason being is the quotation not reaching the resistance of the MACD line on the four-hour chart. Services PMI will be released this afternoon with the forecast of 50.7 against 50.4 in November, which will allow the price to work out the resistance before the final turn down with the release of US employment data. The forecast for the change in Non-Farm Employment is 179 thousand in December versus 155 thousand in November. Hence, the target levels for the coming days are 1.2485, 1.2400, 1.2300.

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Intraday technical levels and trading recommendations for GBP/USD for January 4, 2019

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Since Mid-November, Successive Lower Highs were demonstrated around the price levels of 1.3060, 1.2920 and 1.2800 maintaining movement within the depicted H4 bearish channel

Shortly after, a quick bearish decline was demonstrated towards the price level of 1.2500 before bullish recovery could take place on December 12.

A bullish Head & Shoulders pattern was demonstrated on the H4 chart with neckline located around 1.2650-1.2680. Hence, a successful bullish breakout above the depicted bearish channel was demonstrated on December 24.

On Last week's Thursday, early bullish breakout attempt above 1.2720 was demonstrated on the H4 chart. However, the market failed to maintain sufficient bullish momentum above 1.2800 (mid-range of the depicted consolidation range).

That's why, another bearish pullback was executed towards 1.2500 (backside of the broken channel) where significant bullish recovery was demonstrated during Yesterday's consolidations.

Another bullish breakout above 1.2720 is mandatory to resume the bullish scenario of the market towards 1.2800, 1.2880 and 1.3000. Otherwise, the pair remains trapped within the previous consolidation range (1.2500-1.2720).

Bullish persistence above 1.2550 is mandatory for buyers. Any bearish decline below 1.2500 invalidates the bullish scenario suggesting further bearish decline towards 1.2440.

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Forecast for USD / JPY pair on January 4, 2019

USD / JPY pair

The tragedy of the collapse of the yen is difficult to describe. In one week, the price lost 575 points, which was the minimum of 2018 and 57% of the total annual growth. The reason for this was the weekend in Japan where orders of major players in the market simply did not exist, they were removed before the New Year holidays, disabling the market makers to provide liquidity to their currency. The fall in price has fundamentally changed the technical layout. A lot of resistance has appeared before the price and growth is expected to be difficult and complicated, especially in conditions of turbulence in stock markets.

Today, the US expects data for December. The hourly rate of 0.3%. We're waiting for you to go in stock. Yesterday, the S & P 500 lost 2.48% on the panic around Apple and the yen will grow to closest goals of 109.42 as the daily price channel line of resistance and 110.00 at MACD line on H4 chart.

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US House of Representatives voted for a budget without funds for the wall

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The House of Representatives of the US Congress voted to adopt a draft budget that allows for the resumption of the work of some federal agencies of the American government. At the same time, the budget does not include funding for the construction of a wall on the border with Mexico, as insisted by US President Donald Trump.

The new bill includes short-term funding from the United States Department of Homeland Security (MUP) and the allocation of $ 1.3 billion to protect the border. 239 people voted "for", 192 people voted "against". The White House administration rejected the proposed draft budget.

As is known, the current suspension of the federal government in the United States was caused by disagreements between Congress and the White House on the issue of financing the construction of a wall on the border with Mexico in order to minimize the flow of illegal migration. Donald Trump, who insists on building the wall, argues that the US budget should be earmarked for $ 5.7 billion for this project.

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The Fed may suspend the interest rate increase process.

The US dollar remains under pressure on the wave of the continuing uncertainty factor regarding the prospects for further growth of the US economy, which signals its slowdown, as well as growth in connection with this expectation that the Fed may not only fail to carry out the two-fold increase in interest rates year but also pause in the process.

An important signal, which the markets heard on Thursday, was the comment of Fed member of the President of the Federal Reserve Bank of Dallas R. Kaplan, who bluntly stated that he was against further raising interest rates. He suggested not raising interest rates until it becomes clear where the economy will continue to move, in the direction of growth or a real emerging trend of the slowdown will only increase. And although Kaplan currently does not have the right to vote against the background of the current rotation in the American Central Bank, his words may already reflect the opinion of other Fed representatives who are voting and may influence the regulator's decision to raise borrowing costs.

Posted on Thursday, data on employment in the US private sector from the company ADP exceeded all expectations, showing a growth in the number of new jobs in December, 271,000 against the forecast increase of 179,000, but the negative was the revision of the November values down to 157,000.

At first, the dollar reacted to this data positively, "rising" against all major currencies, but then the following data from the index of business activity in the manufacturing sector from ISM put pressure on it. And the values of the indicator were really disappointing. The indicator fell in December to 54.1 points against the November value of 59.3 points and the forecast of a decline to 57.9 points.

As we mentioned above, the worst expectations regarding the slowdown of the American economy are justified, which may force the Fed to pause in raising interest rates, in an effort to observe the dynamics of the national economy. Given the growth of this probability, most likely, high volatility and growth in demand for the Japanese yen, as well as the Swiss franc, will continue to be observed in the foreign exchange market. Strengthening the yen in this situation may not even contain the likely foreign exchange intervention by the Central Bank of Japan.

Forecast of the day:

The EUR / USD currency pair continues to be in the range of 1.1270-1.1460. In the wake of the weakness of the US dollar, the pair may continue to climb to the upper limit of the 1.1460 range after fixing above the 1.1400 level.

The USD / CAD currency pair is trading lower on the back of weakness in the US dollar and rising crude oil prices. If these factors remain, and the price consolidates below 1.3435, there is a chance that it will continue to fall to 1.3365.

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Investors are adjusting long-term dollar plans

ISM business activity index, published on Thursday evening, confirmed concerns about the approaching crisis in the American economy. Despite the fact that the economy has been expanding for 116 consecutive months, the growth rate has declined very quickly, the industrial sector is slowing down faster than other sectors. The December figure was 54.1 p., below 59.3 p. A month earlier, the result was noticeably worse than forecast, while the new order index fell from 62.1 p to 51.1 p., the employment index fell from 58.4 p to 56.2 p., supply volumes and inventories fell, the level demand, and the price sub-index fell to a minimum since June 2017, which threatens to fall in real incomes and inflation expectations.

A little earlier, the ADP report on employment in the private sector outwardly looks very positive, since the number of new jobs has significantly exceeded forecasts, however, it has not been without a spoonful of tar, strong growth has been recorded in the service sector, while in industry it is more than ambitious, and in extraction it was completely reduced.

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Today, a report on the labor market for December will be published, it is expected that the number of new jobs in the economy will again be consistently high, which should give support to the dollar index, but the focus will not be on the average wage growth rate, and here the situation is not improving, on the contrary, worsens. As long as consumer confidence indexes are high, panic is not dominant, but the trend is getting worse and worse. It is expected that the annual growth rate of average wages will drop from 3.1% to 3.0%, which will be a sign of a decrease in inflationary pressure, which has long been reflected in the fall in yields of 5-year TIPS bonds, which again updated the two-year minimum.

Business is waiting for a decrease in inflation and, as a result, a fall in consumer confidence, which will inevitably lead to even more rigid adjustments to the Fed's plans.

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Despite the fact that, as a result of the December meeting, the Fed is still pursuing an expansionary policy, albeit at a slower pace, the market has already begun to prepare for the worst, and these fears do not go unnoticed by the Fed officials. The head of the Federal Reserve Bank of Dallas, Robert Kaplan, said on Thursday that during the first half of 2019, interest rates must be abandoned due to increased volatility and increased uncertainty in US economic growth and a slowdown in global growth.

Any pause in the rate growth will be a powerful bearish factor for the dollar, and the market reassessment of forecasts has already arrived. Futures on the CME rate for the first time in several years turned in the opposite direction, now investors see the prospect not of a rate increase in 2019, but on the contrary, its decline.

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The situation for the dollar looks worse and worse. The slowdown of the global economy will affect, first of all, the commodity currencies, but the dollar may lose the status of a defensive asset if the US economy starts to shrink faster than the market expected, and this is precisely what is going on. The report on the labor market today may be noticeably worse than expected, which will lead to a decrease in the dollar index and an increase in panic.

Eurozone

The ECB, in a rapidly changing environment, is following a cautious strategy and keeping the euro situation in check. The regulator does not give any public forecasts on the date of the first rate increase, and a significant part of the repayments in the framework of the completion of the asset repurchase program, which for 2019 is 167 billion euros, intends to reinvest back, and, as a rule, in the same jurisdiction in which repayment. These intentions give concern to the ECB, which the main vector of efforts will be aimed at maintaining stability, that is, plans to reduce the balance of the ECB markets will not see soon.

On Friday, EUR / USD is neutral in anticipation of a report on employment, the boundaries of the range of 1.13 - 1.15 are wide, the shift is more likely towards the upper limit.

Great Britain

The currency pair GBP / USD has no direction, the recovery in oil prices supports the pound, as well as the prospect of a weaker dollar, the probability of growth to resistance 1.2730 is slightly higher.

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Trading Plan 01/04/2019

The last days brought some news showing a slowdown in the US.

The ISM Index Industrial Report came out much lower in December but still above level 50 (fact 54), a value above 50 indicates growth. The market is embarrassed by a significant decline in Apple's forecast in terms of sales for the quarter. Plus Tesla Ilona Mask is forced to lower prices, demand is obviously falling.

At the same time, the ADP employment report came out strong, the labor market is up to par.

The Fed: Business media write that the Fed may not raise the rate over the course of 2019.

Today, the official report on employment in the United States at 14.30 London time.

EUR / USD: We buy from 1.1500, we sell from 1.1300.

9duztfiNn7YPRYqMKqkXPUF63Xsf4y8LLjc5O57zThe material has been provided by InstaForex Company - www.instaforex.com

Bitcoin analysis for January 04, 2019

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Trading recommendations:

According to the 30M time - frame, I found that BTC rejected from the Fibonacci retracement 38% ($3.778), which is a sign that sellers are in contol. In my opinion that sellers are setting the tone which is proved by the ADX reading above the 25. The short – term trend is bearish and my advice is to watch for selling opportunities. The downward targets are set at the price of $3.645 and at the price of $3.541.

Support/Resistance

$3.780 – Intraday resistance

$3.712– Intraday support

$3.645 – Objective target 1

$3.540 – 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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Simplified wave analysis of AUD / USD for January 4

Large-scale graphics:

The direction of the short-term trend "Aussie" throughout the past year was directed to the "south" of the chart. In the structure of the movement took shape the first 2 parts (AB).

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Medium scale graphics:

The last wave of the scale H1 has formed a correction of complex shape in a larger model.

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Small-scale graphics:

On December 3, a new downward wave of small-scale was launched, which could potentially give rise to the final segment of the main trend. In recent days there has been a price rise with a high wave level, claiming at least the place of correction.

Forecast and recommendations:

In the nearest week period, the price of the pair will move towards the main trend. Conducting trade transactions in such conditions is inappropriate. You need to wait for its completion and look for entry signals along the main trend direction.

Resistance zones:

- 0.7080 / 0.7130

Support areas:

- 0.6830 / 0.6780

Explanations for the figures: The simplified wave analysis uses waves consisting of 3 parts (A – B – C). The analysis uses 3 consecutive scale graph. Each of them analyzes the last, incomplete wave. Zones show calculated areas with the highest probability of reversal. The arrows indicate the wave marking by the method used by the author. The solid background shows the formed structure, the dotted - the expected movement.

Attention: The wave algorithm does not take into account the duration of tool movements over time. To conduct a trade transaction, you need confirmation signals from the trading systems you use!

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Simplified wave analysis of GBP / USD for January 4

Large-scale graphics:

The decline, which began in April of last year, led the price of the pair to the upper border of the wide support zone. The incomplete wave structure allows waiting for the continuation of the current decline.

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Medium scale graphics:

The last wave section in the direction of the main course started on November 7. From the upper limit of the wide support zone in the last month, a counter pullback is formed.

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Small-scale graphics:

Rising wave from December 12 in the time wave corrects the first trend segment (A). The middle part of its structure formed a stretched plane.

Forecast and recommendations:

Lasts in recent weeks flat mood has every chance to continue. The most likely range of fluctuations remains the plot between the opposite zones. Trading in such conditions is risky.

Resistance zones:

- 1.2690 / 1.2740

Support areas:

- 1.2500 / 1.2450

Explanations for the figures: The simplified wave analysis uses waves consisting of 3 parts (A – B – C). The analysis uses 3 consecutive scale graph. Each of them analyzes the last, incomplete wave. Zones show calculated areas with the highest probability of reversal. The arrows indicate the wave marking by the method used by the author. The solid background shows the formed structure, the dotted - the expected movement.

Attention: The wave algorithm does not take into account the duration of tool movements over time. To conduct a trade transaction, you need confirmation signals from the trading systems you use!

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

GBP / USD. 4th of January. The trading system. "Regression Channels". The correction is completed, data from the United States

4-hour timeframe

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Technical details:

The senior linear regression channel: direction - down.

The junior linear regression channel: direction - down.

Moving average (20; smoothed) - sideways.

CCI: -23.5206

The GBP / USD currency pair spent the last trading day in a purely technical correction to the moving average line. The pair has not managed to consolidate above the moving one, so there is a high probability of a rebound, from a technical point of view. However, on Friday, January 4th, much will depend on the published macroeconomic information in the United States. Today there will be several very important reports, in particular, NonFarm Payrolls, a salary report, and the unemployment rate, in which non-compliance of forecasts and real values can cause a tangible market reaction. Thus, in the American trading session, an increase in volatility and a sharp reversal is possible. There are no scheduled important publications in the UK today. No new information on Brexit is currently available. You can only mark the statement of Labor Party leader Jeremy Corbyn that he will refuse to vote for the draft Theresa May, probably, like his entire party. But this, however, is not such an important and unexpected news. The fact that Parliament is unlikely to support the Checkers plan has long been clear. In general, it is still extremely important for the pound to remain above 1.2480. Two times the bears tried to overcome this level, both times failed. Therefore, there are hopes that this is the bottom for the currency pair.

Nearest support levels:

S1 - 1.2573

S2 - 1.2512

S3 - 1.2451

Nearest resistance levels:

R1 - 1.2634

R2 - 1.2695

R3 - 1.2756

Trading recommendations:

The currency pair GBP / USD has adjusted to the moving average. In the event of a price rebound from this line, it will be possible to open new sell orders with targets at 1.2573 and 1.2512. It is recommended to trade in small lots, as the pair is still at its minimum values.

Buy positions are recommended to be considered after the price is fixed above the moving average line with targets at 1.2695 and 1.2756. Weak macroeconomic data from the United States today can support the British currency.

In addition to the technical picture, you should also consider the fundamental data and the time of their release.

Explanations for illustrations:

The senior linear regression channel is the blue lines of the unidirectional movement.

The junior linear channel is the purple lines of the unidirectional movement.

CCI is the blue line in the indicator regression window.

The moving average (20; smoothed) is the blue line on the price chart.

Murray levels - multi-colored horizontal stripes.

Heikin Ashi is an indicator that colors bars in blue or purple.

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

EUR / USD. 4th of January. The trading system. "Regression Channels". Reports from the US are ready to return the pair to

4-hour timeframe

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Technical details:

The senior linear regression channel: direction - down.

The younger linear regression channel: direction - up.

Moving average (20; smoothed) - sideways.

CCI: -44.8821

The EUR / USD currency pair on Friday, January 4, adjusted to the moving average line and failed to consolidate above it. Thus, the pair has every chance of resuming the downward movement within the wide side channel with a minimum upward slope. A large number of macroeconomic reports are scheduled for the last trading day of the week. In the Eurozone today released a preliminary value of the consumer price index for December and is expected to drop to 1.8%. Thus, if the forecast comes true, then the final value of inflation may slow down, which is a negative factor for the euro. The main macroeconomic information comes from the States today. There will be a report today NonFarm Payrolls, the number of new jobs created contributed to the agricultural sector, unemployment, changes in average wages, indexes of business activity in the services sector and production of Markit, and also the speech of Fed Chairman Jerome Powell. The forecasts for these reports can be called fairly neutral, the ratio of the forecasts with the real value will be more important, rather than the forecasts themselves. Based on the size of this package of macroeconomic information, today increased volatility is expected for all instruments related to the US dollar, including the EUR / USD pair.

Nearest support levels:

S1 - 1.1383

S2 - 1.1353

S3 - 1.1322

Nearest resistance levels:

R1 - 1.1414

R2 - 1.1444

R3 - 1.1475

Trading recommendations:

The EUR / USD currency pair has worked moving. Thus, now remain relevant short positions with targets of 1.1353 and 1.1322. A signal to the opening of the shorts will turn the Heikin Ashi indicator down.

Buy orders are recommended to be considered no earlier than fixing the price above the moving and Murray level of "6/8" - 1.1414. In this case, the bulls will have the opportunity to develop their success with the objectives of 1.1444 and 1.1475.

In addition to the technical picture, you should also consider the fundamental data and the time of their release.

Explanations for illustrations:

The senior linear regression channel is the blue lines of the unidirectional movement.

The younger linear regression channel is the purple lines of the unidirectional movement.

CCI - blue line in the indicator window.

The moving average (20; smoothed) is the blue line on the price chart.

Murray levels - multi-colored horizontal stripes.

Heikin Ashi is an indicator that colors bars in blue or purple.

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

EUR / USD: Today's fundamental data will set the market direction

The euro and the pound rose slightly against the US dollar after the release of fundamental statistics on the US economy, as well as after the statements made by the Fed representative, who believe that the central bank should not rush to increase the interest rate this year.

According to the US Department of Labor, the number of initial claims for unemployment benefits rose from 10,000 to 231,000 over the week from December 23 to December 29. Economists had expected that the number of unemployed people last week rose to 220,000.

Today, an important report on the number of people employed in the non-agricultural sector will be released, which may further weaken the position of the US dollar against a number of risky assets, in the case of weak labor market indicators. Economists expect job growth of 176,000 and unemployment at 3.6%.

As for the ADP report on the number of jobs in the US private sector, there was an increase.

According to Automatic Data Processing Inc. and Moody's Analytics, in December 2018, the number of jobs increased by 271,000. This was due to higher hiring of employees in a medium-sized company. In November, the number of jobs increased by 157,000, while previously, an increase of 178,000 was reported. Economists had expected an increase in jobs in the private sector by 178,000.

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Weak performance indicators in the US manufacturing sector also put pressure on the US dollar in the afternoon. The slowdown occurred directly due to falling demand for US goods.

According to the Institute for Supply Management, the PMI Purchasing Managers Index for the manufacturing sector in December 2108 dropped to 54.1 points. Let me remind you that the index values above 50 indicate an increase in activity. Economists had expected the index to be 57.9 points in December.

As I noted above, the speech of the representative of the Federal Reserve Robert Kaplan was negatively perceived by the markets, as he was mainly against the rate hike this year.

As Kaplan stated, the Fed must be patient and take into account recent events, such as the slowdown of the global economy and the tightening of financial conditions in the markets. Kaplan also believes that the Fed should not exclude an adjustment to the process of reducing the balance, but so far there is no need to change the rate of reduction of the balance.

As for the technical picture of the EUR / USD pair, further growth will directly depend today on the data on inflation in the Eurozone, as well as on the report on the US labor market. The breakthrough of resistance of 1.1420 may lead to a larger uptrend, reaching the highs in the area of 1.1450 and 1.1490. In the case of a downward correction, a good level for euro purchases will be the area of 1.1345.

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GBP/USD analysis for January 04, 2019

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Recently, the GBP/USD pair has been trading upwards. The price tested the level of 1.2690. According to the H1 time – frame, I have found that price is trading above the 3-moving averages, which is a sign that buyers are in control. I also found that AO oscillator and AC oscillator are showing reading above the zero, which is another positive sign for further upward movement. The Asian session showed a neutral tone but the the European session is showing strength. Watch for buying opportunities. The upward targets are set at the price of 1.2720 and at the price of 1.2760.

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Analysis of EUR / USD Divergences for January 4. Euro recovered 50% of losses.

4h

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The EUR / USD currency pair reversed in favor of the EU currency with a consolidation above the level of correction of 23.6% - 1.1358, after the formation of a bullish divergence in the CCI indicator. As a result, on January 4, the pair growth process can be continued in the direction of the next Fibo level of 38.2% - 1.1446. None of the indicators have maturing divergences on the current chart. Rebound of the pair from the Fibo level of 38.2% will work in favor of the American currency and return to the correctional level of 23.6%.

The Fibo grid is built on extremes from September 24, 2018, and November 12, 2018.

Daily

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On the 24-hour chart, the currency pair reversed in favor of the US dollar and continues the process of returning to the correctional level of 127.2% - 1.1285. Rebounding the pair from the Fibo level of 127.2% will allow us to count on a turn in favor of the euro currency and the resumption of growth in the direction of the correction level of 100.0% - 1.1553. Fixing quotes below the Fibo level of 127.2% will increase the probability of the pair to continue falling in the direction of the next correction level of 161.8% - 1.0941.

The Fibo grid is built on extremums from November 7, 2017, and February 16, 2018.

Recommendations to traders:

Purchases of the EUR / USD currency pair can be made now with a target of 1.1446 and a Stop Loss order below the Fibo level of 23.6% since the pair completed the closing above the level of 1.1358.

Sales of the EUR / USD currency pair can be carried out with the target of 1.1358 with a Stop Loss order above the Fibo level of 38.2% if the pair rebounds the correction level of 1.1446.

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Analysis of GBP / USD Divergences for January 4th. The pound has risen to two important levels and can be rebound.

4h

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The GBP / USD currency pair on a 4-hour chart, after a rebound from the correction level of 127.2% - 1.2491, performed a U-turn in favor of the British currency and an increase to the correction level of 100.0% - 1.2662. Rebounding the quotations of the pair on January 4 from this level will allow us to expect a reversal in favor of the US currency and a return to the Fibo level of 127.2% - 1.2491. There are no ripening divergences today. Fixing the pair over the correction level of 100.0% will increase the chances for further growth in the direction of 76.4% - 1.2812.

The Fibo grid is built on extremes from August 15, 2018, and September 20, 2018.

1h

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On the hourly chart, the quotes of the pair completed the growth to the correction level of 50.0% - 1.2646. Releasing the pair from this Fibo level will allow traders to expect a reversal in favor of the American dollar and a slight drop towards the level of 76.4% - 1.2556. Fixing the pair above the Fibo level of 50.0% will work in favor of continuing growth in the direction of the following correction levels of 38.2% - 1.2685 and 23.6% - 1.2734. There are no maturing divergences on the current chart.

The Fibo grid is built on extremums from December 12, 2018, and December 31, 2018.

Recommendations to traders:

You can make purchases of the GBP / USD currency pair with targets at 1.2685 and 1.2734 and a Stop Loss order below the level of 50.0% if the pair closes above the Fibo level of 1.2646 (hourly chart).

Sales of the GBP / USD currency pair can be carried out with targets at 1.2606 and 1.2556 and a Stop Loss order above the level of 50.0% if the pair bounces back from the level of 1.2646 (hourly chart).

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