Overview of the EUR/USD pair for January 6. Again, the index of business activity. The threat of military conflict in the

4-hour timeframe

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Technical data:

The upper channel of linear regression: direction - up.

The lower channel of linear regression: direction - up.

The moving average (20; smoothed) - sideways.

CCI: -59.5968

A new trading week begins for the EUR/USD currency pair. And it begins with expectations of a new fall in the European currency. We have already said in previous reviews that most of the fundamental and technical factors now lie on the side of the US currency, and even a very weak index of business activity in the US manufacturing sector ISM did not cause any panic in the market and did not lead to a strong fall in the US dollar. Thus, Friday's correction can be interpreted as a correction and, accordingly, the main downward movement can be resumed today. Moreover, traders were not able to confidently overcome the moving average line and the Murray level of "6/8". Thus, a rebound from these two resistances may trigger a resumption of the downward trend.

As for the macroeconomic component, on the first trading day of the week, several quite interesting, but essentially secondary reports will be published at once. For example, retail sales in Germany, which may be interesting in themselves, but are unlikely to cause at least some reaction from traders. It is about the same with the indices of business activity in the services sectors of the EU countries and the EU as a whole. These indicators are confidently located above the level of 50.0, so there are no concerns. Only the British index in the services sector is below the key mark of 50.0, but this is in the article on GBP/USD. In the States, after lunch, there will also be published indexes of business activity in the service sector and composite, which are also confidently located above 50.0. Thus, the market reaction to a whole pile of business activity indices will follow only if one or more of them frankly fail or significantly exceed the forecast values.

Meanwhile, currency traders continue to wonder how the military conflict between the United States and Iran may affect the world economy. In itself, a military conflict is nothing good, especially since the parties have not calmed down. Iran threatened to take revenge on America for the slain Colonel Soleimani, to which Trump immediately responded with the following message via Twitter: "Let this serve as a WARNING that if Iran strikes any Americans or American assets, we have targeted 52 Iranian sites (representing the 52 American hostages taken by Iran many years ago), some at a very high level & important to Iran & the Iranian culture, and those targets, and Iran itself, WILL BE HIT VERY FAST AND VERY HARD. The USA wants no more threats!"

At the same time, not all US military officials believe that killing Soleimani was the right move. US intelligence suggested that the option of killing Soleimani should be considered only as of the most extreme step. Some military officials did say that General Soleimani was preparing an attack on US embassies and consulates in Syria, Iraq, and Lebanon. However, other officials expressed skepticism that the Iranian General was planning anything like this at all. A senior official said that the situation in the Middle East as of December 30 was normal, and there was nothing unusual about Soleimani's movements. However, all this is a lyric. The most important thing that the whole world can face now is a military conflict and terrorist attacks. I want to believe that it will do without this, but it is unlikely that Iran will leave the murder of its General without an answer.

The technical picture of the euro-dollar currency pair now suggests a resumption of the downward movement after a small correction. The dollar still has everything you need to continue to rise in price. However, Trump's actions in the Middle East may discourage traders from buying the US currency for a while. Thus, overcoming the Murray level of "6/8" - 1.1169 can return the bulls to the currency market.

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The average volatility of the euro-dollar currency pair is now 60 points, which is the average value for the euro. Thus, we have volatility levels on January 6 - 1.1100 and 1.1220. The reversal of the Heiken Ashi indicator downwards will indicate the resumption of the downward movement to the lower border of the volatility channel.

Nearest support levels:

S1 - 1.1139

S2 - 1.1108

S3 - 1.1078

Nearest resistance levels:

R1 - 1.1169

R2 - 1.1200

R3 - 1.1230

Trading recommendations:

The euro-dollar pair is currently being adjusted. Thus, it is recommended to wait for its completion, and then start trading on the downside with the targets of 1.1139 and 1.1108. The general fundamental background remains not in favor of the euro, so the fall of the pair is more preferable. It is recommended to return to buying the euro-dollar pair only if the moving and Murray level of 1.1169 is successfully overcome with the first targets of 1.1200 and 1.1220.

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

Explanation of the illustrations:

The upper channel of linear regression - the blue lines of the unidirectional movement.

The lower channel of linear regression - the purple line of the unidirectional movement.

CCI - the blue line in the indicator window.

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

Murray levels - multi-colored horizontal stripes.

Heiken Ashi - an indicator that colors bars in blue or purple.

Possible variants of the price movement:

Red and green arrows.

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Gold and other protective assets will receive support (we consider it possible to buy gold and sell USD/JPY pair)

The main event of recent days, which will have a noticeable impact on world markets, of course, is D. Trump's unexpected and geopolitically risky decision to launch an airstrike at a military facility in Iraq, where Major General Q. Soleimani, the commander of the Islamic Revolutionary Guard unit, was killed and a highly respected and influential person in Iran.

This news has stirred markets, as it can cause not only sharp verbal picks between the United States and Iran, but also cause a military conflict between countries and, in general, cause a large-scale war in the Middle East.

Of course, in this kind of situation, the markets could not help but respond to this news with an increase in demand for defensive assets and, accordingly, a weakening risk appetite. On this wave, the benchmark yield of 10-year-old Treasuries declined from 1.921% to 1.768%, and it still remains noticeably lower than New Year's values although it is growing slightly in electronic trading on Monday. Of course, amid the escalation of the conflict and the extremely high probability of it developing from the Cold War into a hot war, quotes of other assets traditionally in demand in such situations — gold, the Japanese yen, and the Swiss franc — went up sharply.

Meanwhile, gold prices on the spot market, which already received support against the background of the thin market in the New Year's week, soared to April 2013 values, while the quotes of the Japanese yen paired with the US dollar rose to the local maximum of November last year, and the franc added to the values of August 2019.

Now, all the attention of market players will be focused on the dynamics of news on this topic, which will lead to significant market changes. We expect that the new Middle East crisis, which the United States sparked to solve its domestic political problems once again, will dominate other news. Thus, we believe that in this situation, demand for stocks of companies will fall, gold and other protective assets will increase in value over a limited period of time. At the same time, we do not expect that the dollar will noticeably fall to a basket of six major currencies, since a high degree of tension will contribute to the appreciation of the US currency due to increased interest from non-residents in US Treasury bonds. In our opinion, any deterioration in the situation will support the dollar as a safe-haven asset against other major currencies, except for protective ones.

Forecast of the day:

Gold quotes are trading at a noticeable increase in the wake of the escalation of the crisis in the Middle East. They have a high growth potential by 1600.00 after a possible correction to the level of 1557.00.

USD/JPY is under pressure amid rising demand for defensive assets. We believe that it will resume decline to 107.20 after breaking the level of 108.00 and fixing below it.

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Prospects for crude oil after US attack

After several days of the new year 2020 passed, the oil and gold markets literally exploded after the US attack on Iranian general Qassem Soleimani, who was a crucial figure for the entire Middle East. An attack on a state official of this level in itself creates a dangerous "precedent" when one country can kill officials of another state at its own discretion. However, the assassination of the head of the Quds special forces unit, which enjoyed unquestioned authority in Iran and in Shiite circles outside its borders, could spark a widespread war. Moreover, the war, in one of the most explosive regions of the world, through which up to a third of world oil traffic passes.

As soon as it became known about the US attack on the Iranian representative, oil prices soared by 4%, and gold prices rose by 1.77%. In this regard, we, as traders and investors are very interested in the future prospects of these assets, which, however, are not as unambiguous as it might seem at first glance. I examined the dynamics of the price of gold just before the New Year and I must note that the situation is developing according to the plan, but somewhat faster than my expectations. Thus, I will comment on gold in the near future, so stay tuned, but today, I would like to stay on the oil market.

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Among the many commentators on this crisis, there is an opinion that Iran, as a response, can block the Strait of Hormuz, thereby disrupting shipping on this important transport route, as well as attacking objects in Saudi Arabia. After that, oil prices will skyrocket to 100, 200 and even 500 dollars per barrel. However, such a development of events seems unlikely to me, and this is why: - Iran, of course, can try to stop shipping in the region, but I don't understand what benefits and advantages it will have from it?

The first and most obvious result of the closure of the Strait of Hormuz is the rise in oil prices, although it will do little good to Iran. At the beginning of 2018, Iran produced 3.84 million barrels per day before Washington pulled out of the deal under the nuclear program. However, oil production in Iran decreased after the introduction of sanctions by the Trump administration, and in November 2019, production amounted to only 2 million barrels. Therefore, raising the price of oil to $ 100 could theoretically return Iran's previous income, but it's quite obvious that Iran will be even more internationally isolated by taking such measures. In addition, it is unclear how Iranian oil will be transported and sold on the world market, so who will buy it?

The second point is that Iran will not be able to harm the United States of America by shutting off oil transportation, and if it does, the damage to the United States from such actions can be minimal. Once the United States imported large volumes of oil from the Persian Gulf region, the overlap of traffic could lead to a large-scale energy crisis overseas. But now, America has provided itself with shale oil, and its surplus is exported to Europe and Southeast Asia.

According to the Energy Information Agency which was published in December 2019, the United States continues to import so-called heavy oil, including from the Persian Gulf region, in the amount of up to 4 million barrels per day, but at the same time, it is increasing the export of American light oil. If the United States was a net importer with a deficit of 3.27 million barrels in August 2018, then in December 2019, they became a net exporter of oil with a surplus of 1.26 million barrels.

In other words, the restriction of freedom of navigation, although it would harm the "American devil," is not so significant and only in the short term. However, Iran's reputation and financial losses from such actions can be much higher than the profit received. Among other things, such actions will help the States put together an anti-Iranian coalition among their European allies, who are now not eager to die for the extravagant tricks of Donald Trump.

In turn, the rise in oil prices will help the US shale industry continue to increase production at a new price level, without increasing the effectiveness of technology. As a result, the price of gasoline in the United States will certainly grow, but not so much as to plunge the American economy into crisis, and damage the campaign of Donald Trump, who, at every opportunity, will broadcast about the protection of democratic values and other American nonsense, which the United States, for at once, cover up their unscrupulous actions.

In turn, Europe will suffer first of all from the soaring oil prices, with its insane excise taxes on fuel and China, that is, direct competitors to the United States, and I do not think that the Iranian leaders do not understand this. An attack on the Saudi oil-producing infrastructure makes more sense from the point of view of Iran, especially since it can be carried out by someone else's hands, but in this case, the consequences for Iran and the United States will be about the same as in the case of blocking shipping routes in the Persian Gulf. However, we will not think for Iranian generals and think, but what should we do?

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Figure 1: December Short-Range Forecast for WTI #CL Oil

If you look at the oil market as traders and analysts specializing in this segment saw it at the beginning of December, the collective forecast looked like this: - in February 2020, WTI crude oil was forecast at $ 53.50 (US EIA analysts) and $ 56.75 (NYMEX traders ) (Fig. 1). Moreover, the parties radically diverged in price estimates as of December 2020: - analysts assumed the level of $ 59.50, in turn, traders predicted the weighted average level at $ 53.55. Thus, it should be noted that this forecast did not take into account the additional reduction in production that was adopted in early December following the OPEC + meeting and current geopolitical risks.

It does not matter for what reason, but with the forecast of oil prices for December and January, most specialists, both trading and forecasting, hit the sky with their finger. However, the fact is that countries decided to reduce production, speculators began to put their money on rising prices and increase their long positions immediately after the OPEC. This fact is all the more interesting if you look at it from the point of view of information leakage from the administration of the American president.

Over the previous four weeks, the number of speculative purchases increased from 209 thousand to 319 thousand contracts, i.e. more than 50%. At the same time, the total number of market positions was declining. Over the same period, Open Interest in WTI futures contracts decreased from 2610 to 2580 thousand contracts, which corresponds to the level of 2016, when the oil price was in the range of 40-50 dollars per barrel, and not the current values, when Crude Oil is traded ten dollars higher. Geopolitics provides a risk premium.

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Figure 2: Open Interest in the February WTI Oil Option Contract - LOG0

The position on the options market did not change significantly during the trading session, despite the increase in oil prices that occurred immediately after the incident. As before, the main resistance for the price is the level of $ 65, the number of put options corresponds to the number of call options, which indicates the equilibrium of buyers and sellers, and the point of maximum pain for buyers MP is at $ 59. This situation is more likely to indicate the preservation of the range formation rather than the beginning of a new trend.

In fact, new money must come to the market in order for oil to overcome the $ 65 mark and gain a foothold for it, but this is not yet, despite such a glaring event. The reason for the price increase may be a further escalation, but so far the parties are exchanging only threats against each other, and much depends on how soon Iran strikes back.

In terms of logic, I really want to buy oil now, but when did logic work well in the market, especially in conditions of increased volatility? There are no points for comfortable purchasing now, because it is not clear where to put a stop, so there is no need to rush, but I definitely will not sell oil now, since there is a very high risk that level 65 will not stand. As it will actually be, time will tell. Therefore, let us hope that a large-scale war does not happen.

On Monday, January 6, the US Commodity Futures Commission will publish new information on the positions of traders, and although the data will not include recent events, as the report was formed before them, perhaps something new will appear that will allow for greater certainty. For my part, I will, as quickly as possible, inform you about current events and changes.

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GBP/USD and EUR/USD: Pound is in risk of returning to the lows of December last year. Euro's growth depends on the service

Data came out last Friday which, in the first half of the day, put pressure on the European currency. But then, good reports on German inflation returned demand for risky assets, leading to an update of daily highs. Nonetheless, from a technical point of view, the situation in the EUR / USD pair has not changed significantly.

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The report on the German labor market disappointed traders a little. According to the data, the number of unemployed in Germany on December of this year, with a seasonal adjustment, increased immediately by 8,000, whereas, in November, there was a decrease of 14,000. This is in contrast to the projected increase of only 5,000. Comparing to November, the unemployment rate remained unchanged in December and settled to 5.0%. This fully coincided with forecasts. All in all, the total number of unemployed in Germany was 2.227 million, against the November figure of 2.180 million.

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The prolonged fall of the Euro did not happen as the preliminary inflation report indicated a set of upward movement at the end of the year. According to the data, the preliminary consumer price index (CPI) in Germany on December last year increased by 0.5% compared to November, and increased by 1.5% compared to the same period in 2018. This is in contrast to the forecasted growth of 0.4 % and 1.5% respectively. As for the CPI harmonized by EU standards, an increase of 0.6% happened in December. Inflation may have fallen short of the European Central Bank's target of around 2.0%, but the first signs of recovery after the autumn downturn are beginning to be observed.

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With regards to the report on lending in the Eurozone, the situation did not strongly influence the rate of the European currency, however, it is one of the leading indicators of economic growth and is strongly dependent on the availability of credit. According to the data, household lending in November 2019 increased by 3.5%, similar to the increase in October. Meanwhile, lending to companies increased by only 3.4%, as compared to 3.8% in October, indicating a decline in demand. On the other hand, the monetary aggregate M3 of the Euro zone increased by 5.6% in November, as compared to 2018.

Another report that did not attract the attention of traders was the inflation in France. According to preliminary data, the CPI in France on December increased by 0.4% as compared to November, and increased by 1.4% as compared to 2018. It is fully coincided with economists' forecasts. Additionally, the harmonized CPI was even better, showing an increase of 1.6% per annum.

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Meanwhile, data on the US manufacturing sector put additional pressure on the US dollar last Friday afternoon. The report indicated that activity continued to decline at a stronger pace than expected, thus, the PMI for the US manufacturing sector fell to 47.2 points in December, against November's 48.1 points. It was forecasted to have an increase of 49.0 points. The main pressure was created by the employment sub-index 'decline to 45.1 points, and the production sub-index' decline to 43.2 points against its 49.1 points in November. The sub-index of new orders was slightly less affected, but fell to 46.8 points in December.

From the technical point of view, there are no significant changes in the EUR / USD pair. Today, buyers of risky assets will fight for the resistance level of 1.1180, and the return of which will lead to a more active phase of purchases and growth of the trading instrument in the area of the highs of 1.1210 and 1.1240, where I recommend fixing profits. However, this is all possible if the bulls maintain the level of 1.1150, otherwise, its breakdown will lead to a larger downward movement in the area of the lows of 1.1125 and 1.1090.

GBP / USD

The British pound fell slightly last Friday because of the report that net consumer lending in the UK increased by only 4.5 billion pounds on November last year, as compared to 5.6 billion pounds in October. Net mortgage lending also fell to 4.1 billion pounds, as compared to 4.3 billion pounds in October, while the number of approved mortgages in the UK was at 64,990, against 64,660. The decline in lending was directly linked to tensions over Brexit, as well as to the UK elections that took place in December last year. Unsurprisingly, unsecured consumer lending also fell to 0.6 billion pounds, down from 1.3 billion pounds in October last year.

Today, traders of the British pound will be monitoring an important indicator of activity in the service sector, as this can determine the future direction of the market, since most of the economy falls on this sphere. The service sector index is expected to continue declining and remain unchanged at 49 points, similar to December last year. If the indicator returns beyond 50 points, this will indicate an increase in activity, and buyers of pound will quickly cope with the resistance of 1.3110 and return to the market. This is to ensure growth to the highs of 1.3200 and 1.3290.

On the contrary, weak indicators and continued pressure on the services sector will push the pound below the support of 1.3060, collapsing the trading instrument to the lows of 1.3000 and 1.2960. There is "close at hand" in the December levels.

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EUR/USD. Preview of the week: US-Iran conflict, European inflation and Nonfarm

The euro-dollar pair was quiet during the Asian session on Monday: the trading week began without a gap, although the single currency tried to develop corrective growth, inertially continuing Friday's price movement. But anti-risk sentiment does not allow the euro to show character, while the downward momentum of EUR/USD has exhausted itself on the final day of the trading week. The market is waiting for fresh news drivers - either from the external fundamental background, or from macroeconomic reports. In general, this week will be held under the sign of geopolitical tension, amid the release of data on the growth of European inflation and the US labor market. All other fundamental factors will be of a secondary nature.

It is noteworthy that the foreign exchange market did not actually respond to rocket attacks on the so-called green zone of the Iraqi capital - the Baghdad quarter, where the US embassy is located. Although this incident is a continuation of the US-Iran conflict, which was triggered by the assassination of General Kassem Soleimani. The dollar was in high demand at the end of last week amid rising anti-risk sentiment, as traders used the US currency as a defensive tool.

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Weekend events did not alarm the market, despite the fact that the conflict itself is still in an active phase. According to the military adviser to the supreme leader of Iran, Ali Hosseini Khamenei, Tehran is preparing a strike on American military targets, and this strike will be "equivalent to the one delivered by the Americans." In response to these threats, US President Donald Trump recalled that any attack by Tehran will receive a "quick, strong and disproportionate response." The head of the White House warned that US forces are holding 52 Iranian targets and are ready to strike at them if Iran attacks the Americans. According to the Pentagon, Tehran has put the missiles on high alert - but it is not yet known whether the increased level of readiness of the Iranian missile forces is defensive or offensive.

It is worth noting that the greenback ignored the verbal exchange of threats - the dollar index began the trading week rather sluggishly, demonstrating a flat movement. Nevertheless, if the Iranian side realizes its intentions, anti-risk sentiment will increase again in the market, providing indirect support to the US currency. If Tehran's revenge is, let's say, "local in nature," then traders will again switch to macroeconomic reports - at least to the most important ones.

The most important reports of the current week are easy to determine - this is the release of data on the growth of European inflation and the December Nonpharma. The general consumer price index in the eurozone has been gradually decreasing since June, and reached its lowest level of 0.7% in October. However, inflation then unexpectedly recovered to one percent, providing substantial support to the euro. Positive dynamics is also expected in December - according to analysts, the indicator will grow to the level of 1.3%. Core inflation should demonstrate similar dynamics - experts believe that the core index will be released in the green zone at around 1.4%. If the indicators come out at least at the forecast level, the EUR/USD pair will get a reason for its growth, as inflation dynamics is under the scrutiny of the European Central Bank. There are certain prerequisites for the growth of pan-European inflation, judging by the growth rate of German inflation. In December, inflation in Germany rose to 0.5% MOM and 1.5% YOY (with a forecast of growth to 0.4% and 1.4%, respectively). The harmonized consumer price index also ended up in the green zone: 0.6% MOM and 1.5% YOY. In monthly terms, the indicators showed the strongest dynamics since April last year. The indicators also reached many-month highs in annual terms, contrary to the neutral forecasts of most analysts. All this suggests that tomorrow's release may pleasantly surprise EUR/USD buyers.

The final chord of the current trading week will be the Nonfarm data. According to preliminary forecasts, conflicting data on the labor market may undermine the position of the greenback. Thus, the unemployment rate should slightly increase - up to 3.6%, against the background of a relatively weak increase in the number of employees (+150 thousand). But here a separate line is worth noting the growth rate of the average hourly wage. Experts anticipate the indicator to recover - in annual terms, it should grow to around 3.1%, and in monthly terms - to 0.3%. If salary data is in the red zone, then it will be difficult for dollar bulls to keep their positions by that time.

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Thus, macroeconomic reports most likely this week will be on the side of the bulls of the EUR/USD pair. But now it's impossible to speak unequivocally about the priority of long positions in the pair - first of all, due to the continuing geopolitical tension. If the US-Iran conflict gets a new round of development, the pair may decline at least to the bottom of the 11th figure. The closest support level is located at 1.1060 - this is the upper boundary of the Kumo cloud on the daily chart.

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Technical analysis for GBP/USD for the week from January 6 to 11

Trend analysis.

This week, the price will move down with the first target of 1.2925 - a pullback level of 38.2% (red dotted line). If reached, continue the downward movement with the target of 1.2741 - pullback level of 50.0% (red dotted line).

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Fig. 1 (weekly chart).

Complex analysis:

- Indicator analysis - down;

- Fibonacci levels - down;

- Volumes - down;

- Candle analysis - neutral;

- Trend analysis - down;

- Bollinger lines - down;

- Monthly chart - up.

The conclusion of the complex analysis - a downward movement.

The overall result of calculating the candle of the GBP/USD currency pair according to the weekly chart: the price for weeks is more likely to have a downward trend with the absence of the first upper shadow of the weekly black candlestick (Monday - down) and the absence of the second lower shadow (Friday - down).

Unlikely scenario - from the support line of 1.3029 (white fat line), work up to the target of 1.3255 - resistance line (black bold line).

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Technical analysis for EUR/USD for the week from January 6 to 11

Trend analysis.

This week, the price will move up with the first target of 1.1239 - the upper fractal. If you break through the top of this level, the next top target will be a pullback level of 76.4% - 1.1276 (blue dotted line).

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Fig. 1 (weekly chart).

Complex analysis:

- Indicator analysis - up;

- Fibonacci levels - up;

- Volumes - up;

- Candle analysis - up;

- Trend analysis - up;

- Bollinger lines - up;

- Monthly chart - up.

The conclusion of the complex analysis - an upward movement.

The total result of calculating the candle of the EUR/USD currency pair according to the weekly chart: the price for weeks is more likely to have an upward trend, with the absence of the first lower shadow of the weekly white candlestick (Monday - up) and the absence of the second upper shadow (Friday - up).

Unlikely lower scenario - from the level of 1.1159 (the previous week's close), a downward movement from the first lower target of 1.11123 - a pullback level of 23.6% (red dotted line). If successful, the next lower target of 1.1077 is a pullback level of 38.2% (red dotted line).

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Indicator analysis: Daily review on GBP / USD on January 6, 2020

Trend analysis (Fig. 1).

On Monday, the price may continue to move down with the target of 1.3010, this is the support line presented in a white thick line. If this line is reached, there is an upward movement with the target of 1.3169, this is the pullback level of 50.0% presented in a yellow dashed line.

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Fig. 1 (daily chart).

Comprehensive analysis:

- Indicator analysis - down;

- Fibonacci levels - down;

- Volumes - down;

- Candlestick analysis - down;

- Trend analysis - up;

- Bollinger Lines - up;

- Weekly schedule - up.

General conclusion:

On Monday, the price may continue to move down.

An unlikely scenario is possible, where, from the support line in white thick line, work down, with the target of 1.2995 a retracement level of 76.4% presented in a red dashed line.

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

Dollar is facing threat of further weakening, strengthening of CAD is almost completed, and JPY is growing due to geopolitical

The PMI ISM index in production fell to 47.2p in December, which turned out to be the lowest result since June 2009, and declined outside the forecast range of 47.5-50.4p. Such a low result was an absolute surprise for the markets, since a positive response was expected to be concluded in the first phase of the trade agreement, financial conditions improved, and regional indices were generally quite positive.

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As a result, December was the fifth consecutive month of PMI reduction, with the pace of decline accelerating. Moreover, almost all the components of the index are reduced - demand, new orders, consumption, employment, and the probability that the December employment report will also be worse than expected has decreased.

Trumponomics obviously fails, even though stock indices are increasing - the slowdown in production does not give any reason to hope for an improvement in the trade balance even taking into account the deal with China. The trend is so obvious that the question of why Trump needed a small victorious war has a clear answer - without clear signs of strength, the results of the November elections can be predicted without even being a soothsayer.

Against the backdrop of a sharp increase in geopolitical risks, oil updated its six-month high, returning to the level of $ 70 per barrel, while gold is even close to 7-year levels. In April 2013, when gold prices traded at $ 1,570 per ounce, the EUR/USD rate fluctuated in the range of 1.28 - 1.33, which is significantly higher than the current 1.11. Thus, this means that the potential for the dollar to decline in the coming months is quite strong.

On the other hand, the FOMC protocol for the December meeting did not have a noticeable effect on the markets, since their publication coincided with a period of low activity. The Fed proceeds from what has already been done enough to stop the threat of recession, and now, a pause will be taken to track incoming data.

At the same time, the Fed sees risks downward, and the ISM index significantly enhances these risks. The likelihood that the rate will be reduced again in March is growing, and similar expectations will continue to put pressure on the dollar. The battle for the REPO, which the Fed seems to have won, has led to a sharp increase in its balance sheet and monetary base.

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Meanwhile, the Fed reports that activity in the repo market will slow down, as reserves will be added through purchases of T-bills, from which the probability of QE4 is growing. As a result, the dollar is under pressure due to both growing liquidity and the approach of QE4, and because of the threat of a recession and an increase in the probability of a rate cut in March.

Collectively, the first week of 2020 indicates the likelihood of a depreciation of the dollar as well as an increase in gold and oil due to the threat of geopolitical risks and uncertainty about the form of Iran's response to the killing of the second person in the state, which will entail an increase in demand for protective assets.

USD/CAD

The Canadian dollar fixed below 1.30, which was facilitated by rising oil prices, but a further decrease in the loonie is unlikely. In addition, there are no internal factors for the Canadian growth - the PMI in production slowed down in December from 51.4p to 50.4p, and although formally it still remains in the expansion zone, the tendency to slow down can be clearly seen. In turn, geopolitical risks are high and can provoke a way out of commodity currencies at any time.

The decrease in USD/CAD was already 76.4% of the September maximum, the momentum is close to exhaustion, and a return to resistance of 1.3040 / 50 is possible. Now, if it goes above, the movement to the key level of 1.5150 / 75 is likely to develop.

USD/JPY

According to Jibun Bank, Manufacturing PMI of Japan continues to decline, confidently consolidating below 50p. In December, the index fell to 50.4p, and thus, the prospects became a little more clear for the yen. The threat of geopolitical risks leads to the demand for the yen as a protective currency, a slowdown in production and the US-China trade deal not in favor of Japanese exporters. As a result, the likelihood that the yen will strengthen amid worsening macroeconomic factors will push the Cabinet of Ministers and the Bank of Japan to take new measures to support the economy.

An attempt to gain a foothold below 107.88 support was unsuccessful, but the threat of a decrease in USD/JPY remains. The goals are 107.70 and 107.08, with a further decrease, verbal reaction of officials in order to prevent the strengthening of the yen will be likely.

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Indicator analysis: Daily review on EUR / USD on January 6, 2020

Trend analysis (Fig. 1).

On Monday, the price may continue to move down with the first target of 1.1126 which is the lower fractal. If this level is reached, the upward movement can resume with the first goal of 1.1166 the historical resistance level presented in a blue dashed line.

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Fig. 1 (daily chart).

Comprehensive analysis:

- Indicator analysis - down;

- Fibonacci levels - down;

- Volumes - down;

- Candlestick analysis - down;

- Trend analysis - up;

- Bollinger Lines - down;

- Weekly schedule - up.

General conclusion:

Monday is a downward trend.

An unlikely scenario is possible, where, from 1.1162 (closing of the Friday afternoon candle), the price will go up to the pullback level of 61.8% which is at 1.1209 presented in a blue dotted line.

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Elliott wave analysis of GBP/JPY for January 6, 2020

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GBP/JPY is correcting wave iii and should ideally push lower towards the 137.31 - 137.57 area to complete the onging zig-zag correction. Once complete we will be looking for renewed upside pressure, but we also have to be aware that the ongoing zig-zag could be part of a more complex and prolonged wave iv correction, but only time will show. For now we have to go we the facts we have present and that is more downside pressure to complete the zig-zag correction in wave iv in the 137.31 - 137.57 area.

R3: 143.00

R2: 142.78

R1: 142.22

Pivot: 141.77

S1: 141.29

S2: 141.09

S3: 140.85

Trading recommendation:

We will sell GBP at 142.50 if seen for a dip into the 137.31 - 137.57 area.

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Elliott wave analysis of EUR/JPY for January 6, 2020

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EUR/JPY completed a leading diagonal mid-December with the test of 122.66 and is currently correcting the advance from 115.83 to 122.66. The ideal corrective target is seen at 119.26 when wave 2 has corrected 50% of wave 1. This is also the low of wave iv of one lessor degree.

Short-term we are looking for a minor bounce into resistance in the 121.18 - 121.36 area from where the next downside pressure is expected towards the 119.36 target.

R3: 121.69

R2: 121.36

R1: 121.18

Pivot: 120.87

S1: 120.37

S2: 119.88

S3: 119.26

Trading recommendation:

We will sell EUR at 121.20 with a 122.20 stop and take profit at 119.50.

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GBP/USD: plan for the European session on January 6. Weak UK services data could be a significant problem for the pound

To open long positions on GBP/USD you need:

The pressure on the pound remained on Friday, but the bulls are doing their best to at least somehow regain the market position. Today, they can be helped by a report on the UK services sector, which will set the direction of the market at the beginning of this week. In case of good indicators, a break of the upper limit of 1.3108 will strengthen the demand for the pound, which will lead to the renewal of highs in the areas of 1.3154 and 1.3195, where I recommend taking profits. In the scenario of a pound decline after the release of data, the formation of a false breakout in the support area of 1.3064 will also be a buy signal. Otherwise, it is best to open long positions only after the formation of a false breakout in the region of a low of 1.3018, or immediately to a rebound from support at 1.2966.

To open short positions on GBP/USD you need:

Bears will wait for a report on the service sector, and if it turns out to be worse than economists' forecasts, a breakthrough of the lower boundary of the triangle, which indicates the continuation of the current downward trend, as well as a breakthrough of support at 1.3064, all this will lead to further GBP/USD decline to the area of lows 1.3018 and 1.2966, where I recommend taking profits. An unsuccessful attempt by the bulls to return to the resistance level of 1.3108 will also be a signal to open short positions. If the pair grows above this range, you can sell on the rebound from a high of 1.3154, or after updating larger resistance at 1.3195.

Signals of indicators:

Moving averages

Trade is conducted below 30 and 50 moving averages, which indicates that pressure will be preserved in the short term.

Bollinger bands

A break of the lower boundary of the indicator at 1.3064 will increase pressure on the pound. A break of the upper boundary in the area of 1.3105 may lead to larger growth.

analytics5e12c2758b214.png

Description of indicators

  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
  • MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
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EUR/USD: plan for the European session on January 6. Germany's miraculous inflation growth helped the euro. Focus on the

To open long positions on EURUSD you need:

Friday's German inflation data, which sharply rose in December last year, is good news for the European Central Bank, as well as for euro buyers, who are now rushing to the level of 1.1178, and on which a further upward correction depends. A break and consolidation above this range, along with a good report on the services sector of the eurozone countries, could lead to further growth of EUR/USD to the highs of 1.1207 and 1.1239, where I recommend taking profits. In case of weak reports and poor performance at eurozone producer prices, it is best to return to long positions only after a false breakout has formed in the support area of 1.1152, and I recommend buying the euro for a rebound only after updating the lows of 1.1127 and 1.1095.

To open short positions on EURUSD you need:

Sellers will be waiting for a weak report on the eurozone services sector, which has recently continued to demonstrate stability. Only the formation of a false breakout in the resistance area of 1.1178 will maintain pressure in the EUR/USD pair, and the first target of sellers will be to support 1.1152. In the scenario of its breakout, we can count on a larger bearish momentum already in the area of lows 1.1127 and 1.1095, where I recommend taking profits. If sellers are not able to cope with resistance at 1.1178 in the morning, then you can return to short positions after a test of a high at 1.1207, or sell the euro immediately to rebound from resistance at 1.1239.

Signals of indicators:

Moving averages

Trading is carried out in the region of 30 and 50 moving average, which indicates the lateral nature of the market and the likely completion of the bearish correction.

Bollinger bands

If the pair decreases, support will be provided by the lower boundary of the indicator in the region of 1.1130. The upper boundary of the indicator in the region of 1.1180 will act as resistance, a break through which will lead to an increase in the euro.

analytics5e12c01ab3459.png

Description of indicators

  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
  • MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
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Technical analysis: Important intraday Level For EUR/USD, January 06,2019

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PPI m/m, Sentix Investor Confidence, Final Services PMI, German Final Services PMI, French Final Services PMI, Italian Services PMI, Spanish Services PMI, and German Retail Sales m/m are on tap from the euro area. The US will release such economic data as on Final Services PMI. So, amid the reports, EUR/USD will move in a low to medium volatility during this day. TODAY'S TECHNICAL LEVEL: Breakout BUY Level: 1.1229. Strong Resistance: 1.1223. Original Resistance: 1.1212. Inner Sell Area: 1.1201.Target Inner Area: 1.1175. Inner Buy Area: 1.1149. Original Support: 1.1138. Strong Support: 1.1127. Breakout SELL Level: 1.1121. (Disclaimer)

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Technical analysis: Important intraday Level for USD/JPY, January 06, 2020

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The Final Manufacturing PMI index from Japan is due. The US will release such economic data as Final Services PMI. So, there is a probability that the USD/JPY pair will move with low to medium volatility during this day.TODAY'S TECHNICAL LEVEL: Resistance. 3:108.51. Resistance. 2:108.30. Resistance. 1:108.09. Support. 1:107.82. Support. 2:107.61. Support. 3:107.40. (Disclaimer)

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Control zones for GBP/USD on 01/06/20

The closing of last week's trading occurred within the significant support zone of WCZ a 1.3092-1.3073. This indicates the formation of an accumulation zone. Closing today's trading will indicate a priority. If the closure of the US session occurs below the level of 1.3073, then sales will come to the fore, and the first target of the fall will be a weekly control zone 1.2900-1.2862.

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The position of the last three European sessions indicates a change in balance in the direction of a depreciation.

To resume the upward momentum in the medium-term, it will be necessary to close today's trading above the WCZ 1/2. This will make it possible to enter into purchases and keep them up to the December high. The probability of rising and falling, at the moment, can be estimated as 50/50. This requires waiting for the close of today's trading to receive confirmation of the direction to enter.

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Daily CZ - daily control zone. The area formed by important data from the futures market, which changes several times a year.

Weekly CZ - weekly control zone. The zone formed by important marks of the futures market, which changes several times a year.

Monthly CZ - monthly control zone. The zone, which is a reflection of the average volatility over the past year.

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Control zones for EURUSD on 01/06/20

Friday's breakout of the WCZ a 1.169-1.161 makes it possible to consider the downward movement along with growth. Closing last week's trading occurred within the zone, which indicates the formation of a medium-term accumulation zone. Confirmation of the downward impulse will require consolidation below 1.1161 at today's US session.

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The location of the last three European sessions indicates interest in pulling down the pair further on the part of a major regulator.

To cancel the downward model, closing of today's trading above the WCZ a will be required. This will allow you to consider buying tomorrow. The first goal of growth will be the December high. Further growth will be possible after consolidating above the indicated extremum. It is important to note that December growth was a strong medium-term impulse, so the likelihood of its continuation is high.

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Daily CZ - daily control zone. The area formed by important data from the futures market, which changes several times a year.

Weekly CZ - weekly control zone. The zone formed by important marks of the futures market, which changes several times a year.

Monthly CZ - monthly control zone. The zone, which is a reflection of the average volatility over the past year.

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Control zones for AUD/USD on 01/06/20

Closing last week's trading occurred below the Weekly Control Zone 1/2 0.6974-0.6968. This indicates a change in priority. The next target of the decline was the weekly control zone 0.6914-0.6902. The probability of reaching this zone is 75%. Meanwhile, the nearest resistance is the weekly control zone 1/4 0.6964-0.6961. The test of which will determine the model for the first half of the week.

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The most favorable selling prices can be obtained if the pair can grow to Weekly Control Zone 1/2 0.6997-0.6991.

An alternative model will be developed in case the decline last Friday takes over today. This will allow us to talk about the abolition of the downward impulse. The probability of implementing this model is 30%, which makes it an auxiliary. At the same time, development towards the weakening of the Australian dollar should be a priority.

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Daily CZ - daily control zone. The zone formed by important data from the futures market that changes several times a year.

Weekly CZ - weekly control zone. The zone formed by the important marks of the futures market, which change several times a year.

Monthly CZ - monthly control zone. The zone that reflects the average volatility over the past year.

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Forecast for EUR/USD on January 6, 2019

EUR/USD

Last Friday, the euro made an attempt to push the technical level of 110.0% Fibonacci on the daily chart, but it failed on its first attempt. On Saturday, US President Trump threatened to attack 52 Iran's targets in the event of Iran's military response to a US missile strike, leading to the assassination of General Soleimani. Trump was indirectly supported by Britain, Germany and France, once again urging Tehran to comply with the nuclear deal. We doubt the development of the conflict before the hot phase of the war with Iran, but the current situation can help the dollar in getting out of consolidation (of course, in the direction of strengthening), stretching from July last year.

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On the daily chart, the signal line of the Marlin oscillator approached the lower boundary of its own channel, the exit from which down will strengthen the fall of the euro. The purpose of the movement is the embedded line of the global downward price channel in the region of 1.1045.

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Forecast for GBP/USD on January 6, 2019

GBP/USD

The British pound closed Friday by a decrease of 55 points, having met support from the MACD line on the daily chart. Overcoming this support, that is, consolidating the price below the Friday low, opens the target of 1.2820 - the Fibonacci reaction level of 138.2% on the daily chart. The signal line of the Marlin oscillator is slightly in the negative territory, but a local reversal of the line from the border could lead the pound to corrective growth to the Fibonacci level of 200.0% at the price of 1.3205.

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On the four-hour chart, Friday's growth was also delayed by the MACD line, and already with the support of the Fibonacci level of 23.6%. The level of 1.3050 is strategic; consolidating the price below it will strengthen the subsequent fall of the British pound.

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Forecast for USD/JPY on January 6, 2019

USD/JPY

As investors flee from risk on Friday, the yen strengthened against the dollar by 47 points. This morning the movement continued, the price approached the support of the green price channel at 107.68. Overcoming the support will allow the price to test the strength of the support of the red price channel at 107.34. A breakthrough of this support opens the target at 106.30. The Marlin oscillator is steadily falling in the negative zone.

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On the four-hour chart, the Marlin signal line is correcting up. This is the working moment of the discharge of the oscillator before the further trend movement, which could resume tomorrow.

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Fractal analysis for major currency pairs on January 6

Forecast for January 6 :

Analytical review of currency pairs on the scale of H1:

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For the euro / dollar pair, the key levels on the H1 scale are: 1.1238, 1.1220, 1.1198, 1.1182, 1.1144, 1.1123, 1.1105 and 1.1085. Here, the price forms a local potential for the upward structure of January 3. The continuation of the movement to the top is expected after the breakdown of the level of 1.1182. Here, the goal is 1.1198. Price consolidation is near this level. The breakdown of the level of 1.1198 will lead to a pronounced upward movement. Here, the target is 1.1220. For the potential value for the top, we consider the level of 1.1238. Upon reaching this level, we expect a pullback to the bottom.

The level of 1.1144 is a key support for the top and its breakdown will lead to the subsequent development of the descending structure of December 31. In this case, the first goal is 1.1123. The breakdown of the level of 1.1123 will allow you to count on movement to the level of 1.1105. For the potential value for the bottom, we consider the level of 1.1085.

The main trend is the descending structure of December 31, the local potential for the top of January 3.

Trading recommendations:

Buy: 1.1182 Take profit: 1.1196

Buy: 1.1199 Take profit: 1.1220

Sell: 1.1144 Take profit: 1.1125

Sell: 1.1121 Take profit: 1.1107

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For the pound / dollar pair, the key levels on the H1 scale are: 1.3417, 1.3338, 1.3282, 1.3199, 1.3097, 1.3061 and 1.3006. Here, we are following the development of the ascending structure of December 23. At the moment, the price is in the zone of initial conditions. The continuation of the movement to the top is expected after the breakdown of the level of 1.3200. In this case, the target is 1.3282. Short-term upward movement, as well as consolidation is in the range of 1.3282 - 1.3338. For the potential value for the top, we consider the level of 1.3417. Upon reaching which, we expect a pullback to the bottom.

Consolidated movement is possibly in the range of 1.3097 - 1.3061. The breakdown of the latter value will lead to an in-depth correction. Here, the target is 1.3006. This level is a key support for the top.

The main trend is the upward structure of December 23

Trading recommendations:

Buy: 1.3200 Take profit: 1.3280

Buy: 1.3283 Take profit: 1.3336

Sell: 1.3097 Take profit: 1.3061

Sell: 1.3058 Take profit: 1.3008

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For the dollar / franc pair, the key levels on the H1 scale are: 0.9822, 0.9798, 0.9766, 0.9738, 0.9698, 0.9678 and 0.9644. Here, the price forms the potential for the upward movement of December 31 in the correction of the downward cycle of December 24. The continuation of the movement to the top is expected after the breakdown of the level of 0.9738. In this case, the target is 0.9766. Price consolidation is near this level. The breakdown of the level of 0.9766 will lead to a pronounced movement. In this case, the target is 0.9798. For the potential value for the top, we consider the level of 0.9822. Upon reaching which, we expect consolidation, as well as a pullback to the bottom.

Short-term downward movement is possibly in the range of 0.9698 - 0.9678. The breakdown of the latter value will favor the development of a downward structure. In this case, the first target is 0.9644.

The main trend is the descending cycle of December 24, the correction stage

Trading recommendations:

Buy : 0.9738 Take profit: 0.9764

Buy : 0.9767 Take profit: 0.9796

Sell: 0.9698 Take profit: 0.9678

Sell: 0.9676 Take profit: 0.9645

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For the dollar / yen pair, the key levels on the scale are : 108.87, 108.61, 108.35, 108.17, 107.70, 107.53, 107.27 and 107.11. Here, we continue to monitor the local descending structure of January 2. Short-term downward movement is possibly in the range 107.70 - 107.53. The breakdown of the last value will lead to a pronounced movement. Here, the target is 107.27. For the potential value for the bottom, we consider the level of 107.11. Upon reaching this level, we expect consolidation, as well as a rollback to the top.

Short-term upward movement is possibly in the range 108.17 - 108.35. The breakdown of the last value will lead to an in-depth correction. Here, the target is 108.61. This level is a key support, the breakdown of which will allow counting on movement to a potential target - 108.87.

Main trend: local descending structure of January 2

Trading recommendations:

Buy: 108.17 Take profit: 108.35

Buy : 108.37 Take profit: 108.60

Sell: 107.70 Take profit: 107.54

Sell: 107.51 Take profit: 107.28

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For the Canadian dollar / US dollar pair, the key levels on the H1 scale are: 1.3058, 1.3045, 1.3019, 1.3000, 1.2950 and 1.2924. Here, we are following the development of the local descending structure of December 23. The continuation of movement to the bottom is expected after the breakdown of the level of 1.2950. In this case, the target is 1.2924. We expect a key reversal to the correction from this level.

Short-term upward movement is possibly in the range of 1.3000 - 1.3019. The breakdown of the latter value will lead to an in-depth correction. Here, the target is 1.3045. The range 1.3045 - 1.3058 is a key support for the downward structure. We expect the initial conditions for the upward cycle to be formed before it.

The main trend is the local descending structure of December 23

Trading recommendations:

Buy: 1.3005 Take profit: 1.3017

Buy : 1.3020 Take profit: 1.3045

Sell: 1.2950 Take profit: 1.2926

Sell: Take profit:

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For the Australian dollar / US dollar pair, the key levels on the H1 scale are : 0.7007, 0.6980, 0.6964, 0.6923, 0.6905, 0.6867 and 0.6851. Here, we consider the descending structure of December 31 as a medium-term structure. Short-term downward movement is expected in the range 0.6923 - 0.6905. The breakdown of the latter value will lead to a pronounced movement. Here, the target is 0.6867. We consider the level of 0.6851 to be a potential value for the bottom. Upon reaching this level, we expect a pullback to the top.

Short-term upward movement is expected in the range 0.6964 - 0.6980. The breakdown of the latter value will lead to an in-depth correction. Here, the target is 0.7007. This level is a key support for the descending structure of December 31.

The main trend is the descending structure of December 31

Trading recommendations:

Buy: 0.6964 Take profit: 0.6980

Buy: 0.6982 Take profit: 0.7005

Sell : 0.6923 Take profit : 0.6907

Sell: 0.6903 Take profit: 0.6868

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For the euro / yen pair, the key levels on the H1 scale are: 121.25, 120.93, 120.75, 120.13, 119.84 and 119.57. Here, we are following the development of the descending structure of December 27. The continuation of movement to the bottom is expected after the breakdown of the level of 120.13. In this case, the target is 119.84. Price consolidation is near this level and hence, the probability of a reversal to the correction is high. For the potential value for the bottom, we consider the level of 119.57, from which we expect a pullback.

Short-term upward movement is possibly in the range of 120.75 - 120.93. The breakdown of the last value will lead to an in-depth correction. Here, the goal is 121.25. This level is a key support for the downward structure.

The main trend is the descending structure of December 27

Trading recommendations:

Buy: 120.75 Take profit: 120.90

Buy: 120.95 Take profit: 121.25

Sell: 120.13 Take profit: 119.86

Sell: 119.82 Take profit: 119.58

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For the pound / yen pair, the key levels on the H1 scale are : 142.79, 142.22, 141.75, 140.66, 140.12, 139.32 and 138.86. Here, we are following the development of the descending structure of December 31. Short-term downward movement is expected in the range 140.66 - 140.12. The breakdown of the last value should be accompanied by a pronounced downward movement. In this case, the target is 139.32. We consider the level of 138.86 to be a potential value for the bottom. Upon reaching this level, we expect a pullback to the top.

Short-term upward movement is possibly in the range of 141.75 - 142.22. The breakdown of the last value will lead to an in-depth correction. Here, the goal is 142.79. This level is the key support for the descending structure of December 31.

The main trend is the descending structure of December 31

Trading recommendations:

Buy: 141.75 Take profit: 142.20

Buy: 142.24 Take profit: 142.77

Sell: 140.65 Take profit: 140.14

Sell: 140.10 Take profit: 139.34

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GBP/USD. January 5. Results of the week. Johnson is ready to discuss a deal with the EU. Labour makes a meaningless proposal

4-hour timeframe

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Amplitude of the last 5 days (high-low): 57p - 148p - 83p - 179p - 135p.

Average volatility over the past 5 days: 121p (high).

The pound sterling lost almost two cents in the first two trading days of 2020 and this is far from the limit. The British currency will be prone to a new fall in the first and second months of 2020. Almost all factors testify to this. For example, technical. After the pound/dollar pair soared to the level of 1.3500 (completely unreasonable), there was a pullback, then a correction against this pullback, which amounted to 61.8%, so now traders are ready for the second wave of sales, which should be no less strong than the first wave. Thus, according to the most conservative estimates, the pound quotes should fall below 1.2900. The fundamental picture says roughly the same thing. The pound still simply does not have fundamental grounds for strengthening. Brexit looms on the horizon ... no, not that. The disordered Brexit looms again on the horizon and now the opposition forces of the British Parliament will not be able to stop it: all power is concentrated in the hands of Conservatives who will support any initiative of Boris Johnson. The "hard" Brexit, with which the absence of a trade deal with the European Union is now identified, is a catastrophic blow to the economy of Great Britain, which is already facing what is known as far from its best times. Recent data on business activity in the manufacturing sector confirms this. In addition to these two factors, there is another factor - speculative. Traders raised the pound quite high and, most likely, realizing the groundlessness of such growth, used those levels for large sales, which will now be fueled by other traders who will support the emerging trend. Thus, from our point of view, there is only one road for the pound - down.

Meanwhile, Johnson, who had previously blocked the possibility of extending the duration of the transition period, is beaming with the desire to continue trading with the European Union after Brexit. Next week, European Commissioner Ursula von der Leyen will arrive in London for the most likely preliminary negotiations. Johnson believes that 11 months is enough to agree on new trading conditions. However, the British prime minister seems to be the only one who thinks so. Throughout 2020, the UK will have uniform European trade standards. Until July 1, 2020 London has an official and legal opportunity to extend the transition period for another two years, after July 1 - it will end anyway on December 31, 2020, after which the trade rules for third countries will be applied to the UK. That is, London will lose all trade preferences and, if no agreement is reached by that time, will begin to incur losses due to high duties on non-EU goods.

Johnson himself is optimistic about the future. He said: "Saying goodbye to 2019, we can turn the page with the disagreement, hostility and uncertainty caused by Brexit. We are starting a new chapter in the history of our country, where we will unite and move forward, revealing the potential of the British people." Johnson also once again reminded that the country's main goal is to leave the EU, after which all government forces will be directed to the development of the health care system, education and improving security.

The Labour Party, having suffered a crushing defeat in the elections, proposes to extend the transition period until 2023, if it is not possible to reach an agreement with the EU before July 1, 2020. The report says that this is necessary to prevent the unsettled Brexit. However, as many experts say, this proposal is already doomed to failure, since the Conservatives have the "majority government" in their hands.

The technical picture now almost unambiguously indicates a continued downward movement. The sell signal from Ichimoku dead cross is weak at the moment, however, the price is located inside the cloud and its lower boundary is now the Senkou Span A line, which is not strong support or resistance. Thus, problems with overcoming this line should not arise. The volatility of the GBP/USD currency pair remains quite high.

Trading recommendations:

GBP/USD continues to move down. Thus, at the moment, traders are advised to sell the pair with targets at 1.0101 and 1.2950. These goals will be specified tomorrow morning. So far, you can sell the pair in small lots, since the dead cross is still weak. However, we believe that the probability of continued downward movement is 90%. It is recommended that purchases of British currency be returned no earlier than when the price is consolidated above the Kijun-sen line.

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicators window.

Support / Resistance Classic Levels:

Red and gray dotted lines with price symbols.

Pivot Level:

Yellow solid line.

Volatility Support / Resistance Levels:

Gray dotted lines without price designations.

Possible price movement options:

Red and green arrows.

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

EUR/USD. January 5. Results of the week. Military conflict between Iran and the United States. Weak US ISM index

4-hour timeframe

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Amplitude of the last 5 days (high-low): 27p - 93p - 49p - 42p - 59p.

Average volatility over the past 5 days: 54p (average).

The first trading week of January 2020 was marked with a negative for the European currency. We have repeatedly said at the end of last year that the euro, as well as the pound, often showed growth when it was not justified by fundamental factors. For example, what were the reasons for the euro's growth from December 26 to December 31? No important macroeconomic reports were published during this period, no important fundamental events took place. Thus, we said in the last days of the past year that in early January, a drop in the euro/dollar pair is very likely. In practice, this happened, and we believe that even despite macroeconomic statistics, the euro will continue to fall for some more time. We also continue to believe that the future of the euro is almost entirely dependent on the United States and macroeconomic statistics from across the ocean. Only if statistics from the US begins to deteriorate again (and you also need some reason for this), will the euro be able to continue to be in demand in the foreign exchange market as it has been in recent weeks. Otherwise, the downward trend will resume sooner or later.

Traders witnessed two positive factors for the euro on Friday, January 3. First, German inflation in December accelerated from 1.1% to 1.5% YOY, which is higher than experts' forecasts and unexpected. Recall that the index of business activity in the manufacturing sector of Germany remains at the level below the plinth. Nevertheless, the consumer price index rose, which gives us hope that European inflation will also show an acceleration in December. This, of course, does not mean that now the euro will spread its wings and the period of weak inflation will be completed. However, this factor may provide local support for the euro. Secondly, the business activity index in the US ISM manufacturing sector also unexpectedly failed, which amounted to only 47.2 in December, while experts predicted growth to 49.0. Such a strong mismatch between the forecast and the real value caused a wave of discontent among dollar bulls and the dollar plummeted on the US trading session on Friday. Collapsed, however, not far, and the fall process did not take much time. The US currency began to grow again near the close of trading on Friday, offsetting most of the 30-point losses. Thus, we can draw several conclusions. Firstly, traders are not too upset because of the weak ISM index. A low value came as a surprise, but no more. Secondly, the general trend for the euro/dollar pair has not changed at all and still assumes a continued downward movement. Thirdly, the general news background has also not changed and remains in favor of the US dollar.

Meanwhile, the world was on the verge of a new military conflict, of course, not without the participation of the United States and Donald Trump personally. On January 3, after the bombing of the international airport in Baghdad, Iranian general Kassem Soleimani was killed. He was killed personally by Trump's order. The Pentagon later explained that Soleimani was developing plans to attack US diplomats in Iraq, and Trump said Soleimani approved the assault on the US Embassy in Baghdad on December 31. Many media outlets immediately suggested that the response would follow immediately and we could say that now the whole world is watching how Iran will respond. Iran's supreme leader said there will be "severe revenge" in response to the killing of Soleimani. So far, such information does not particularly affect the currency market, however, any geopolitical tension can change the desire of most traders to invest in a particular currency. Thus, indirectly, a military conflict between the United States and Iran could affect the dollar. Negatively. And this is another chance for the euro.

From a technical point of view, the currency pair has already formed a new downward trend, but on Friday an upward correction began, within which the critical Kijun-sen line was worked out. A price rebound from this line may provoke a resumption of the downward movement, and we consider this scenario to be the most probable. In any case, you should now wait until the completion of the current correction and only after that again consider buying the US dollar. If the bulls manage to gain a foothold again above the Kijun-sen line, then the upward trend in the pair may resume, however, from a fundamental point of view, this option is unlikely. Nevertheless, it cannot be completely swept away.

Trading recommendations:

EUR/USD has started a new downward trend. Thus, now it is recommended for traders to wait for the correction to finish and to trade with levels of 1.1118 and 1.1099 as the first goals, however, in small lots, since the current dead cross is still weak. It is recommended to consider buying the pair only in case of breaking the critical line with the first target of 1.1218. All targets, including volatility levels will be specified tomorrow morning.

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicators window.

Support / Resistance Classic Levels:

Red and gray dotted lines with price symbols.

Pivot Level:

Yellow solid line.

Volatility Support / Resistance Levels:

Gray dotted lines without price designations.

Possible price movement options:

Red and green arrows.

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

EUR/USD. Roller coaster amid record-low ISM index

The euro-dollar pair fell into the zone of price turbulence on Friday: demand for the US currency significantly increased in the morning, amid the assassination of a senior Iranian military leader. However, then the bulls of the pair began to gradually win back their positions, and even updated the high of the day. However, at the close of the trading week, the bears seized the initiative again, not allowing buyers to return to the 12th figure. As a result, the pair ended the trading day in almost the same positions where it started (open - 1.1172; close - 1.1160). And apparently, the next week will be no less volatile, given the possible consequences of the elimination of the Iranian general.

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But first of all, we'll figure out why the euro-dollar pair unexpectedly unfolded on Friday, despite the dominance of anti-risk sentiment in the foreign exchange market. Oddly enough, macroeconomic releases still managed to attract the attention of traders. Although, as a rule, during periods of geopolitical tensions, economic reports fade into the background, waiting "in the wings". But we saw an exception to the rule on Friday: the European currency received support thanks to German statistical data, while the dollar collapsed throughout the market due to the extremely weak ISM report. This combination of fundamental factors helped the EUR/USD bulls to stay afloat, leveling the pressure of dollar bulls.

German inflation really pleased investors. This report is especially important now, in anticipation of the release of data on the growth of pan-European inflation (these data will be published on Tuesday, January 7). According to the consensus forecast, the general consumer price index in the eurozone will rise to 1.3%, after the previous increase to a one percent mark. Core inflation should also show a positive trend, rising to 1.4% (multi-year high). Such a result will provide strong support for the euro, therefore, the traders' special attention was riveted to the dynamics of German inflation.

The result exceeded expectations: in December inflation in Germany rose to 0.5% MOM and 1.5% YOY (with a forecast of growth to 0.4% and 1.4% respectively). The harmonized consumer price index also ended up in the green zone: 0.6% MOM and 1.5% YOY. In monthly terms, the indicators showed the strongest dynamics since April last year. In annual terms, indicators also reached multi-month highs. All this suggests that pan-European inflation may exceed forecast values, although the forecast for December itself looks quite strong.

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But US statistics again disappointed. Production indicators have recently left much to be desired, and this fact puts background pressure on dollar bulls. Yesterday, this pressure significantly increased. The fact is that the US manufacturing ISM unexpectedly collapsed to 10-year lows in December, reaching 47.2 points. The index is below the key 50-point mark since August, and a consistent downward trend has been observed since April last year. According to forecasts, the indicator should have grown a little - from 48.1 to 49 points, but de facto fell to multi-year lows (the weakest result since June 2009). Such a significant decline in the overall index was due primarily to a decrease in production - the corresponding index collapsed to 43.2 points, after rising to 49.1 in November. After this release, the dollar index slowed down, allowing the EUR/USD bulls to regain lost ground. And although the price component of the ISM index has significantly grown (to the 51st point), this fact did not affect the reaction of dollar bulls.

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Thus, both long and short positions on the EUR/USD pair looked risky on Friday. The dollar balances between the pressure of negative macroeconomic reports and the influence of anti-risk sentiment. Which factor will prevail next week is unknown. Much will depend on Tehran's further actions.

Iran's Permanent Representative to the UN, Majid Taht-Ravanchi, in an interview with CNN, has already said that the United States have actually declared war on his country, while emphasizing that "a military action will be the answer to a military action." Meanwhile, many analysts doubt that the liquidation of General Kassem Suleimani will lead to a direct clash of Iranians with the Americans or to large-scale hostilities in the Middle East. Most likely, according to political analysts, militarized organizations associated with Iran can attack infrastructure and/or diplomatic facilities in Saudi Arabia or Israel. If Tehran will resort to larger-scale (deadly) actions in relation to American citizens, then the anti-risk sentiment in the market will noticeably increase, as traders in this case will expect a response from Washington already.

From a technical point of view, last week the EUR/USD pair was able to stay between the middle and upper lines of the Bollinger Bands indicator, as well as above all the lines of the Ichimoku indicator, which continues to demonstrate the bullish Parade of Lines signal. This suggests that the pair maintains the growth potential to the nearest upward target - 1.1240 (the high of the current year and a 4-month price high). This scenario will acquire real features in the event of a decrease in anti-risk sentiment amid rising European inflation (the corresponding release, I remind you, is scheduled for January 7).

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