American positive

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Stock indices swallowed their two-week decline amid new developments in China-US trade and gradually worrying concerns about the coronavirus.

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This rapid recovery of the market also alerted investors.

According to the Ministry of Finance of China, they will hold half the tariffs on US imports from February 14, amounting to about $75 billion, as part of its first trade agreement with the US.

The ministry said that tariffs for a number of goods in the US will be reduced from 10% to 5%, and others from 5% to 2.5%. Return import duties were introduced in September and December, because at that time there was hostility between Washington and Beijing.

They also added that the step towards the decline was made to promote the healthy and stable development of China-US economic and trade relations. "China is cutting tariffs. It's the driving force behind today's growth," said chief market strategist, J.J. Kinahan.

"The reduction in tariffs was due to investors' worries that the new virus in China would damage the world's second-largest economy and make it difficult for them to fulfill promises to increase purchases of US goods and services by $200 billion over two years," Kinahan added.

Meanwhile, as expected, on Wednesday, the Senate acquitted President Donald Trump on charges of impeachment for abuse of power and for obstructing Congress. At noon, he delivered a speech in which he called impeachment "a terrible trial."

But, in the meantime, markets are mostly focused on optimistic economic data.

The number of Americans re-applying for unemployment benefits fell 15,000 to 202,000 by the end of the week, reaching a 50-year low. According to a MarketWatch survey, productivity growth accelerated to 1.4% in the fourth quarter, which is lower than the consensus growth forecast of 1.6%.

Investors also hear positive from Federal Reserve speakers at the very moment when Dallas Fed President Robert Kaplan tells an audience in Austin that he expects "solid" economic growth in 2020 by 2.3%.

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Hot forecast for EUR/USD on 02/07/2020 and trading recommendation

As expected, the market froze as it awaits the publication of the report of the United States Department of Labor, and does not respond to any macroeconomic data. Which, by the way, was practically nonexistent.

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Investors had cause for concern, since the data on applications for unemployment benefits came out much worse than forecasts. Their total number was to be reduced by 6 thousand, but in fact, it increased by 33 thousand. On the one hand, the number of initial applications for unemployment benefits did not increase by 2 thousand, but decreased by 15 thousand. However, the number of repeated applications, unexpectedly increased by 48 thousand instead of decreasing by 8 thousand. Nevertheless, the market ignored this news, as it has high hopes for the contents of the report of the United States Department of Labor.

Number of Initial Unemployment Claims (United States):

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Indeed, expectations regarding the contents of the report as a whole are quite optimistic. Yes, the unemployment rate should rise from 3.5% to 3.6%. However, this should happen by increasing the level of economic activity from 63.2% to 63.3%. That is, due to the dull increase in the share of people in good health in the total population. In addition, 148 thousand new jobs should be created outside agriculture. Last month, 145 thousand of them were created. The growth rate of the average hourly wage can accelerate from 2.9% to 3.0%, and the average working week should increase from 34.3 hours to 34.4 hours. Thus, all indicators should show some improvement, and even a possible increase in unemployment is associated exclusively with a positive factor, such as an increase in the number of healthy citizens. So investors have really something to hope for, and given the reaction of the market to applications for unemployment benefits, it seems that these data are already included in the value of the dollar. Therefore, if the forecasts are confirmed, then the growth of the dollar will be significantly limited. However, it is worth paying attention to the fact that absolutely all the data came out completely different from what was predicted over the past couple of days. Moreover, United States labor market data may not be an exception to this rule and if they turn out to be worse than forecasts, then the dollar will rapidly lose its position.

Unemployment Rate (United States):

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From the point of view of technical analysis, we see the first breakdown of the psychological level of 1.1000 for a long time, where the quote managed to go down locally down to the level of 1.0964. In fact, this is not just a local strike, but keeping the quote below all previously formed punctures by shadows, which may mean a change in interests.

In terms of a general review of the trading chart, we see the recovery process with respect to an elongated correction, where the quote has already managed to overcome the 70% recovery bar, which is a good sign in terms of improving the main trend.

It is likely to assume that we will see the retention process at this time, where chatter is not excluded within 1.0965 / 1.0990. Thus, you should not just analyze the fixation points, but look at the current news background, which may put pressure on the quote.

Concretizing all of the above into trading signals:

- Long positions are considered in case of price fixing higher than 1.0990 / 1.1000, coupled with negative data on the report.

- Short positions are considered in the case of fixing lower than 1.0965-60, paired with positive data on the report.

From the point of view of a comprehensive indicator analysis, we see a sell signal relative to all the main time intervals. It is worth considering that the indicators of technical tools at shorter time intervals can be multi-directional, in the event of a slowdown or a rollback.

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Technical analysis of BTC/USD for 07/02/2020:

Crypto Industry News:

Mode, a financial services company supported by Twitter co-founder Biz Stone, has implemented the Bitcoin banking application for iOS devices.

The British company has made its application available worldwide, except for the United States. Customers can start using the application for 50 British pounds and buy Bitcoins using bank cards or by bank transfer. The funds are further processed via BitGo, the trustee of digital assets.

The application allegedly allows users to almost instantly credit funds using a faster payment process. Ariane Murphy, Director of Communication and Marketing in Mode, said that the Mode application solves problems related to transaction restrictions, low speed, high costs, insecurity, and most importantly, copes with the poor user experience usually associated with Bitcoin applications. Before using the Mode application, it requires users to undergo the KYC procedure, which is performed by AI-enabled identity verification technology.

The Mode company, founded in 2018, whose parent company is the British company fintech R8 Group, opened the waiting list for the application in October last year, initially making it available only by invitation.

Technical Market Overview:

The BTC/USD pair has hit the level of $9,795 three times already, so it looks like the market is consolidating the recent gains in extremely overbought conditions. The next target for bulls is the obvious $10k level. The bulls might be still in control of the market, but the counter-trend correction down might resume any time now. Please notice the momentum is clearly decreasing as well, which supports the near-term bearish outlook, that might occur when the level of $10,000 is finally hit. The nearest technical supports are seen on the levels of $9,555 and $9,508.

Weekly Pivot Points:

WR3 - $10,823

WR2 - $10,138

WR1 - $9,838

Weekly Pivot - $9,130

WS1 - $8,807

WS2 - $8,069

WS3 - $7,777

Trading Recommendations:

The market might have made the first impulsive wave up of a higher degree. This strategy is valid as long as the level of $7,582 is not violated. Nevertheless, the larger timeframe trend is still down and all the shorter timeframe moves are still being treated as a counter-trend correction inside of the uptrend until the level of $10,278 is clearly broken.

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Technical analysis of GBP/USD for 07/02/2020:

Technical Market Overview:

The GBP/USD pair is making its way down as the recent low was made at the level of 1.2922. Nevertheless, the market is still range bounded and only a sustained breakout through the level of 1.3512 would resume the uptrend on the larger timeframe. On the other hand, the key level for bears is seen at the level of 1.2904 and if violated, then the breakout from the consolidation zone is valid and this move might be the beginning of a downtrend. The current market conditions are neutral, lightly skewed towards a downward breakout through the support.

Weekly Pivot Points:

WR3 - 1.3548

WR2 - 1.3373

WR1 - 1.3306

Weekly Pivot - 1.3131

WS1 - 1.3071

WS2 - 1.2899

WS3 - 1.2839

Trading Recommendations:

The best strategy for current market conditions is to trade with the larger timeframe trend, which is up, so all downward market moves will be treated as local corrections in the uptrend. In order to reverse the trend from up to down in the longer term, the key level for bulls is seen at 1.2756 and it must be clearly violated. The key long-term technical support is seen at the level of 1.2231 - 1.2224 and the key long-term technical resistance is located at the level of 1.3512.

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Technical analysis of EUR/USD for 07/02/2020:

Technical Market Overview:

The EUR/USD pair has broken through the key short-term technical support located at the level of 1.0981 and made a new swing low at the level of 1.0964. The bounce is shallow so far, so the downtrend continuation might resume any time soon. The weak and negative momentum support the near-term bearish outlook. The next target for bears is then seen at the level of 1.0940, but the key long term technical support is still located at the level of 1.0849. No indication of a downtrend reversal yet.

Weekly Pivot Points:

WR3 - 1.1243

WR2 - 1.1163

WR1 - 1.1138

Weekly Pivot - 1.1062

WS1 - 1.1035

WS2 - 1.0960

WS3 - 1.0930

Trading Recommendations:

The best strategy for current market conditions is the same as it was for recent months: trade with the larger timeframe trend, which is down. All upward moves will be treated as local corrections in the downtrend. The downtrend is valid as long as it is terminated or the level of 1.1445 clearly violated. There is an Ending Diagonal price pattern visible on the larger timeframes like weekly, which indicates a possible downtrend termination soon. The key short-term levels are technical support at the level of 1.0981 and the technical resistance at the level of 1.1267.

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Trading plan on EUR/USD for February 7, 2020

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The markets seem to have acquired some immunity from the coronavirus epidemic in China. Perhaps, it is because the epidemic is still being contained within the country. However, we must understand that if the epidemic covers all of China, the consequences for the Chinese economy, as well as the world, will be very severe.

As of the morning of February 7, 31 thousand people are listed as infected (an increase of + 20% per day); while 636 people are dead (an increase of +20%).

This means that the rate of the spread is not reduced.

Meanwhile, US indices closed at the highs, and oil bounced up from $ 50.

EUR/USD: Today, the US employment report for January (nonfarm) will be released.

Last Wednesday, the employment report from ADP was released, and it showed an unexpectedly very high figure of +290 K.

With that, let's see if the employment growth is confirmed.

On Thursday, the euro broke down the strong support of 1.0990, however, the decline was very little.

You can sell from 1.0990, but stop at 1.1035.

Follow the closing of the day.

In case of a full rebound, buy from 1.1100.

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Dollar has good prospects before the publication of payrolls; USD/CAD and USD/JPY can update local highs

The US dollar continues to receive support before the publication of Payrolls, remaining a favorite across the entire spectrum of the market. Yesterday, the S&P 500 broke the record, reaching 3344p after China announced that it would reduce tariffs on US goods by about $ 75 billion, and Factset reported that 71% of corporations showed profits above the expectations of the market.

Positivity is supported by a decrease in panic regarding coronavirus. According to recent data, mortality is currently 2.0% compared to 2.3% a week earlier.

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The number of applications for unemployment as of January 31 increased by 202 thousand, which was the best result since April 2019, and the head of the Federal Reserve Bank of Dallas, Robert Kaplan, said that he expects the US economy to grow by 2.25% this year, and this forecast would be even higher if not for the problems of Boeing and coronavirus.

On the other hand, the dollar index has good chances to strengthen at the end of the week, but gold and oil will remain in the consolidation zone. However, OPEC has not yet made any comments on upcoming decisions. Meanwhile, gold is under pressure due to a general decrease in tension.

USD/CAD

The Canadian dollar is slightly behind other commodity currencies, which made an attempt to recover amid rising oil and lowering tensions associated with the coronavirus, remaining hostage to the situation regarding the expectations of today's employment report.

The expected speech by Carolyn Wilkins, First Deputy Head of the Bank of Canada, did not bring anything new in terms of understanding BoC's intentions for the near future. In her comments, there was no room for hints of the next steps. In addition, Wilkins noted the threat of a slowdown in the Canadian economy, markets assess the threat of lowering the BoC rate as low - if the probability of such actions was estimated at 25% at the beginning of the month, then on Friday morning, it was only 12%.

As a result, CAD may leave the consolidation zone today depending on the reaction of the rank to the US and Canada employment report. If the Canadian report turns out to be worse, then USD/CAD will overcome the resistance zone 1.3330 / 50 and move to the zone 1.3365 / 82. This is a more likely scenario than the correction to 1.3190 / 3205.

USD/JPY

Japanese household spending declined by 4.8% in January which is an expected pullback amid a small jump after rising consumer tax. In turn, short-term prospects for consumer demand remain disappointing due to a fall in domestic demand, real GDP declined in Q4 2019, and only whether consumer spending can recover depends on whether GDP will grow in the 1st half of 2020.

To compensate for the weak domestic demand, the Japanese government launched a new round of fiscal stimulus, this time in the amount of 13.2 trillion yen which is approximately 2.4% of GDP. These measures concern the state expenses, that is, the government has planned a decrease in consumer demand and closes a growing hole in the budget in advance.

As a result, the dynamics of wages and inflation remain so weak that one can only dream of reaching a 2% target, since there are no chances for growth.

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The recession is delaying in the industrial sector, especially in electronics, exports are declining, and GDP growth will balance at a level slightly above zero.

In such circumstances, the Bank of Japan has no choice but to support the current financial policy, since there is no reason to tighten it, and there is no place to weaken it further. Moreover, inflation will remain very low, weak demand will mean lower demand for raw materials, which for the yen in the end, as an asset that is in the opposite phase relative to commodity prices, will mean the threat of strengthening.

As a result, USD/JPY continues to trade in the range 107.63 - 110.29. The conditions for exiting from which will not mature in any way. Internal factors pull quotes down, as well as the threat of a slowdown in world trade, but a strong dollar, based on high US statistics, looks like a favorite, especially when the demand for defensive assets decreases. The chances of a breaking through the level of 110.29 are increasing. The goal is 110.91.

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Elliott wave analysis of GBP/JPY for February 7 - 2020

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GBP/JPY hit 142.82. It broke below short-term important support at 142.20 which indicates more downside pressure in wave c of iv towards the ideal target at 139.24 and maybe even closer to 137.86.

The 142.82 peak should now be able to cap the upside for more downside pressure. The low has been seen at 140.80 and the final rally to above the peak of wave iii at 147.94 is developing.

R3: 142.82

R2: 142.55

R1: 142.29

Pivot: 142.06

S1: 141.71

S2: 141.44

S3: 141.23

Trading recommendation:

We sold GBP at 142.80 and we will place our stop+revers at 142.90.

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Elliott wave analysis of EUR/JPY for February 7, 2020

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We continue to look for a clear break below minor support at 120.63 and more importantly a break below support at 120.43 to confirm wave v of 2 is unfolding towards the ideal target-zone between 118.85 - 119.24. This should complete wave 2 and set the stage for a new impulsive rally above the peak of wave 1 at 122.66.

Minor resistance at 121.02 should be able to cap the upside for the expected break below 120.63. If, however minor resistance at 121.02 is broken that is a strong indication that we have seen a premature low for wave 2 and wave 3 is developing already.

R3: 126.26

R2: 121.02

R1: 120.80

Pivot: 120.63

S1: 120.43

S2: 120.26

S3: 120.01

Trading recommendation:

We are short EUR from 120.40 and we will lower our stop+revers to 121.10

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EUR/USD Projection HOD/LOD For FEB 07, 2020

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Today's high (HOD) and low (LOD) from the flout range usually form at STDV 2-STDV 4 in the normal condition market but sometimes can reach to the STDV 5-STDV 6 or more. Here's today's level:

STDV 10 - 1.1025.

STDV 9 - 1.1021.

STDV 8 - 1.1017.

STDV 7 - 1.1013.

STDV 6 - 1.1009.

STDV 5 - 1.1005.

STDV 4 - 1.1001.

STDV 3 - 1.0997.

STDV 2 - 1.0993.

STDV 1 - 1.0989.

FLOUT - 1.0985.

==================

FLOUT - 1.0977.

STDV 1 - 1.0973.

STDV 2 - 1.0969.

STDV 3 - 1.0965.

STDV 4 - 1.0961.

STDV 5 - 1.0957.

STDV 6 - 1.0953.

STDV 7 - 1.0949.

STDV 8 - 1.0945.

STDV 9 - 1.0941.

STDV 10 - 1.0937.

(Disclaimer)

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GBP/USD Projection HOD/LOD For FEB 07, 2020

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Today's high (HOD) and lpw (LOD) from the Central Bank Dealer Range (CBDR) usually form at STDV 2-STDV 4 in the normal condition market but sometimes can reach to the STDV 5-STDV 6. Here's for the today's level:

STDV 10 - 1.3068.

STDV 9 - 1.3055.

STDV 8 - 1.3042.

STDV 7 - 1.3029.

STDV 6 - 1.3016.

STDV 5 - 1.3003.

STDV 4 - 1.2990.

STDV 3 - 1.2977.

STDV 2 - 1.2964.

STDV 1 - 1.2951.

CBDR - 1.2938.

==================

CBDR - 1.2920.

STDV 1 - 1.2902.

STDV 2 - 1.2884.

STDV 3 - 1.2866.

STDV 4 - 1.2848.

STDV 5 - 1.2830.

STDV 6 - 1.2812.

STDV 7 - 1.2794.

STDV 8 - 1.2776.

STDV 9 - 1.2758.

STDV 10 - 1.2740.

Pay attention to the level between today and the previous range such as 1.3055 & the previous day high 1.2955 and low 1.2920.

(Disclaimer)

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GBP/USD: plan for the European session on February 7. The nearest target for sellers of the pound is the support of 1.2896.

To open long positions on GBPUSD, you need:

Yesterday, buyers of the pound did not manage to stay above the lows of the previous day, which completely destroyed the hope for a recovery in the short term. Today, the bulls will fight for the resistance of 1.2957, the return of which will restore positions to the area of the highs of 1.3015 and 1.3064, where I recommend fixing the profits. However, important fundamental statistics are not published in the UK today, and only news related to the trade agreement between the UK and the EU can lead to a surge in volatility. So far, there has been no response from the British side to a possible change in the MiFID II from the EU, which continues to put pressure on the pound. In the scenario of a further decline in GBP/USD in the first half of the day, it is best to return to long positions only after updating the minimum of 1.2896 or buy the pound immediately on a rebound from the support of 1.2845.

To open short positions on GBPUSD, you need:

Sellers are confidently following their plan, and their next goal is to update the support of 1.2896. However, a more acceptable signal for opening short positions in the current conditions will be the formation of a false breakdown in the resistance area of 1.2957, just above which you can put a convenient stop. Much will also depend on data on the unemployment rate in the United States. A good report will quickly push GBP/USD to a minimum of 1.2896, where I recommend fixing the profits. A break in this range will also release the pound into a free flight to the support area of 1.2845. In a scenario of growth of the pair above the resistance of 1.2957 after the data on employment in the non-agricultural sector, you can return to short positions on the resistance test of 1.3015 or sell the pound immediately for a rebound from the maximum of 1.3064.

Signals of indicators:

Moving averages

Trading is conducted below the 30 and 50 moving averages, which indicates another predominance of the pound sellers in the market.

Bollinger Bands

A break of the upper border of the indicator at 1.2970 will lead to a sharp increase in the pound. In the scenario of a pair's decline, the lower border of the indicator around 1.2900 may provide support.

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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 February 7. Nonfarm can maintain the EUR/USD downward trend. The target of the

To open long positions on EURUSD, you need:

Yesterday, the bulls failed to hold the support at 1.0993, but a larger surge in volume was noted at the level of 1.0964, to which I repeatedly paid attention in my reviews and recommended opening long positions. Today, we publish an important report on the US labor market along with the unemployment rate, so it is unlikely that volatility will be very high in the first half of the day. Perhaps only data on the volume of industrial production in Germany will be able to somehow shake the market. The bulls will try to regain the resistance of 1.0993, on which a lot depends, and if yesterday the market was on their side, now it is completely under the control of the bears. A breakout and consolidation above 1.0993 will lead to a larger upward correction to the resistance area of 1.1022 and possibly to the maximum test of 1.1046, where I recommend taking the profits. If the euro declines further, it is best to return to purchases only at the false breakdown of the minimum of 1.0964 or to open new long positions in the area of the lows of 1.09453 and 1.0905.

To open short positions on EURUSD, you need:

The bears continue to play out their scenario and yesterday reached the low of 1.0964, from which you could observe profit-taking. For today, the focus will be placed on a weak report on the volume of German industrial production, which will allow you to form a false break in the resistance area of 1.0993 and continue the downward trend. However, a more important task for sellers will be to lower the EUR/USD to the support area of 1.0964, the breakout of which will necessarily lead to an update of the new lows in the area of 1.0943 and 1.0905. In the scenario of buyers returning to the area of 1.0993 in the first half of the day, the focus will shift to the US labor market report, which is expected to be quite strong. If the data disappoints, you can open short positions on a rebound from the maximum of 1.1022 and even higher, in the area of 1.1046.

Signals of indicators:

Moving averages

Trading is conducted below the 30 and 50 moving averages, which indicates the predominance of sellers in the market.

Bollinger Bands

In case of growth in the first half of the day, the upper limit of the indicator of 1.1000 will act as a resistance. Support will be provided by the lower border that coincides with the level of 1.0964.

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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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Overview of the EUR/USD pair. February 7. The US Nonfarm payroll report will determine the fate of the euro at the end of

4-hour timeframe

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Technical data:

Higher linear regression channel: direction - upward.

Lower linear regression channel: direction - downward.

Moving average (20; smoothed) - down.

CCI: -158.6754

For the EUR/USD pair, the last trading day of the week begins with the continuation of the downward movement, as evidenced by the Heiken Ashi indicator. As we said in previous reviews, the pair raised into the 100-point zone before a two-year low of 1.0879. Thus, from our point of view, there is a high probability that another upward turn will be made in this zone with an increase of 100-200 points. This is how all approaches to two-year lows in recent times usually end. Moreover, if you look at the weekly chart of the euro/dollar pair, you can see that over the past 15 months, the loss of the euro currency is no more than 300-400 points, although all this time the downward trend is maintained. That is, every time the quotes approached their long-term lows, there was a pullback to the top and this continues for 15 months, the pair updates its lows by 20-30 points only from time to time, which, does not change the overall picture of the situation. Bears still pay little attention to fundamental factors, to macroeconomic statistics, when it comes to new sales at minimum price values.

Today, February 7, there is an opportunity to contribute to the fall of the European currency by another 50-60 points. In the morning, Germany will publish data on industrial production for December. Experts' forecasts indicate another reduction in volumes, but only by 0.2% monthly and by 4% on an annual basis. We believe that the actual cuts will be greater, but even if the forecasts are exceeded, it is unlikely that the euro currency will receive support from market participants from the report, which will record a drop in production volumes. No more important information is expected from the EU on this day. But it will publish extremely important data in the States. First of all, we are talking about NonFarm Payrolls – the number of new jobs created outside the US agricultural sector. According to experts' forecasts, their number in January will be 160,000, but we will be interested not in the ratio of the real value to the previous one (145,000), but the ratio to the forecast. Thus, exceeding the forecast value can provide serious support for the US currency. I still remember the previous Nonfarm report from ADP on the change in the number of employees in the private sector of the United States. It was much higher than the forecast value, making a record of 291,000 with a forecast of +157,000. However, it often happens that if the ADP report significantly exceeds the forecast, Nonfarm's are worse than expected. In any case, strong data from ADP does not mean that NonFarm Payrolls will also be strong. Also on Friday, data will be published on changes in average wages in annual and monthly terms and the unemployment rate for January, which is likely to remain at its lowest in several decades.

What can be predicted for today? Since the euro currency falls recklessly against the dollar for most of the week, it would be logical to see a correction on the last trading day of the week. However, given the strong fundamental background, everything will depend on it, and, in fact, on a single Nonfarm Payrolls report. On the other side of the scale, there are only potentially strong statistics from across the ocean. Therefore, we would say that the probability of continued downward movement today is no more than 33%.

The US dollar was also supported yesterday by Christine Lagarde, who openly made it clear to the markets that the economic situation in the eurozone may require new ECB interventions, which have at their disposal an extremely small number of working tools to stimulate economic growth. From a technical point of view, there are currently no signs of correction. Thus, up to the reversal of the Heiken Ashi indicator upwards, you can continue to remain in the sales of the euro/dollar pair.

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The average volatility of the euro/dollar currency pair has increased again and is now 55 points per day. Thus, on Friday, we expect movement between the borders of the volatility range of 1.0926-1.1036. However, most likely, a correction will begin, which can be determined by the reversal of the Heiken Ashi indicator to the top.

Nearest support levels:

S1 - 1.0956

S2 - 1.0925

Nearest resistance levels:

R1 - 1.0986

R2 - 1.1017

R3 - 1.1047

Trading recommendations:

The euro/dollar pair continues to move down. Thus, sales of the euro currency with the targets of 1.0956 and 1.0926 remain relevant now, until the Heiken Ashi indicator turns up. It is recommended to return to buying the EUR/USD pair not before the bulls cross the moving average line, which will change the current trend to an upward one, with the first targets of 1.1047 and 1.1078.

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 highest linear regression channel is the blue unidirectional lines.

The lowest linear regression channel is the purple unidirectional lines.

CCI - blue line in the indicator window.

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

Murray levels - multi-colored horizontal stripes.

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

Possible price movements:

Red and green arrows.

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Forecast for EUR/USD on February 7, 2020

EUR/USD

Yesterday, the euro managed to gain a foothold under the enclosed line of the price channel, which originates from the top of 2008. On the daily chart, the price also went under the Fibonacci reaction level of 138.2%.

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Yesterday's publication of industrial orders in Germany for December showed a decrease of 2.1% against expectations of growth of 0.6%. In the US, the weekly report on applications for unemployment benefits showed 202 thousand such applications against the forecast of 215 thousand and 217 thousand a week earlier. The average monthly value of this indicator is 211.2 thousand. Taking into account the excellent data on employment in the private sector from ADP of 291 thousand and good employment sub-indexes in the ISM structure – 46.6 in the manufacturing sector and 53.1 in the non-manufacturing sector, there is a high chance that today's data on new jobs in the non-agricultural sector for January will come out better than the forecast. The forecast for the Non-Farm employment change is 163 thousand against 145 thousand in December. The forecast for wage growth is 0.3% compared to 0.1% a month earlier.

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On a four-hour chart, the price drops below the indicator lines, and the Marlin oscillator goes deeper into the negative trend zone. The decline targets are visible on the daily chart: 1.0925 - minimum on September 3 and 12, 2019, and 1.0880 - minimum on October 1.

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

Forecast for GBP/USD on February 7, 2020

GBP/USD

On Thursday, the British pound on average trading volumes pushed the January support around the Fibonacci level of 161.8%. At the moment, the price is in the area of the December minimum, and taking into account yesterday's volumes, we can assume that the bids for the pound are removed here as well. The market's immediate target is now the 138.2% Fibonacci level at 1.2820. Below is the target range of 1.2728/58, formed by the Fibonacci level of 123.6% and the maximum on June 12, 2019.

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On the four-hour chart, the signal line of the Marlin oscillator lies in the horizontal range – this indicates that the price will consolidate for some time. Probably, the market is waiting for the evening data on employment in the United States. The forecast for the Non-Farm employment change is good: 163 thousand against 145 thousand in December. We are waiting for the decline to continue.

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

Forecast for USD / JPY on February 7, 2020

USD / JPY

The stock market performed a small miracle this week. On the expectations of an early victory over the Chinese coronavirus, the S & P500 grew 3.73%, setting a new historical record yesterday at 3347.96. Japanese Nikkei225 added 4.10% since the opening of the week, while the dollar against the yen, being a pair dependent on stock markets, increased by 165 points. Currently, the price has overcome the resistance of the MACD indicator and has stopped on the line of the red downward price channel. The price exit above the resistance of the green price channel at 110.22, will direct the price to the range 110.83 / 98, formed by the lows on November 27, 2017, and February 11, 2016.

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Such a development of events is now the main scenario, since today, the American data on employment for January with came out with good forecasts. The non-farm employment changed to 163 thousand against the 145 thousand in December, and wage growth of 0.3% against 0.1% a month earlier.

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On a four-hour chart, the price is above the indicator lines, but the Marlin oscillator is sharply falling down. In the presented context, this decrease is interpreted as an indicator discharge before resumption of growth. Fixing the price under the MACD line 109.25 will return the price to a downward trend.

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

Fractal analysis for major currency pairs on February 7

Forecast for February 7:

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: 1.1037, 1.1018, 1.1002, 1.0988, 1.0969, 1.0950, 1.0938 and 1.0909. Here, we are following the development of the descending structure of January 31. The continuation of the movement to the bottom is expected after the breakdown of the level of 1.0969. In this case, the target is 1.0950. Price consolidation is in the range of 1.0950 - 1.0938. For the potential value for the bottom, we consider the level of 1.0909. Upon reaching which, we expect a departure in the correction.

Short-term upward movement is possibly in the range 1.0988 - 1.1002. The breakdown of the last value will lead to an in-depth correction. Here, the goal is 1.1018. This level is a key support for the downward structure. Its passage in price will lead to the formation of initial conditions for the upward cycle. Here, the goal is 1.1037.

The main trend is the descending structure of January 31

Trading recommendations:

Buy: 1.0988 Take profit: 1.1002

Buy: 1.1004 Take profit: 1.1018

Sell: 1.0967 Take profit: 1.0950

Sell: 1.0936 Take profit: 1.0910

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For the pound / dollar pair, the key levels on the H1 scale are: 1.3070, 1.3013, 1.2970, 1.2932, 1.2889, 1.2847 and 1.2754. Here, we are following the development of the descending structure of January 31. Short-term downward movement is expected in the range of 1.2889 - 1.2847. The breakdown of the last value should be accompanied by a pronounced movement to the bottom. In this case, the potential target is 1.2754. We expect consolidation, as well as a pullback to the top near this level.

Short-term upward movement is possibly in the range of 1.2970 - 1.3013. The breakdown of the latter value will lead to an in-depth correction. Here, the target is 1.3070. This level is a key support for the downward structure.

The main trend is the descending structure of January 31

Trading recommendations:

Buy: 1.2970 Take profit: 1.3011

Buy: 1.3015 Take profit: 1.3070

Sell: 1.2889 Take profit: 1.2848

Sell: 1.2845 Take profit: 1.2756

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For the dollar / franc pair, the key levels on the H1 scale are: 0.9826, 0.9810, 0.9781, 0.9760, 0.9744, 0.9719, 0.9701 and 0.9674. Here, we are following the development of the ascending structure of January 31. The continuation of the movement to the top is expected after the price passes the noise range 0.9744 - 0.9760. In this case, the target is 0.9781. Price consolidation is near this level. The breakdown of the level of 0.9781 will lead to a pronounced movement. Here, the target is 0.9810. For the potential value for the top, we consider the level of 0.9826. Upon reaching which, we expect a pullback to the bottom.

Short-term downward movement is possibly in the range of 0.9719 - 0.9701. The breakdown of the latter value will lead to an in-depth correction. Here, the target is 0.9674. This level is a key support for the upward structure.

The main trend is the downward cycle of January 31

Trading recommendations:

Buy : 0.9760 Take profit: 0.9780

Buy : 0.9782 Take profit: 0.9810

Sell: 0.9719 Take profit: 0.9703

Sell: 0.9699 Take profit: 0.9676

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For the dollar / yen pair, the key levels on the scale are : 110.80, 110.47, 109.99, 109.62, 109.41 and 109.07. Here, we are following the development of the ascending structure of January 31. The continuation of the movement to the top is expected after the breakdown of the level of 110.00. In this case, the target is 110.47. Price consolidation is near this level. For the potential value for the top, we consider the level 110.80. Upon reaching which, we expect a pullback to the bottom.

Short-term downward movement is possibly in the range of 109.62 - 109.41. The breakdown of the last value will lead to an in-depth correction. Here, the goal is 109.07. This level is a key support for the top.

Main trend: upward structure of January 31

Trading recommendations:

Buy: 110.00 Take profit: 110.45

Buy : 110.49 Take profit: 110.80

Sell: 109.60 Take profit: 109.42

Sell: 109.38 Take profit: 109.10

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For the Canadian dollar / US dollar pair, the key levels on the H1 scale are: 1.3389, 1.3337, 1.3312, 1.3271, 1.3240 and 1.3195. Here, we are following the development of the upward cycle of January 22. Short-term upward movement is expected in the range of 1.3312 - 1.3337. Hence, there is a high probability of a turn to the bottom. For the potential value for the top, we consider the level of 1.3389. We expect movement to this level after the breakdown of the level of 1.3337.

Short-term downward movement is possibly in the range of 1.3271 - 1.3240. The breakdown of the last value will lead to an in-depth correction. Here, the target is 1.3195. This level is a key support for the top.

The main trend is the local ascending structure of January 22

Trading recommendations:

Buy: 1.3313 Take profit: 1.3335

Buy : 1.3337 Take profit: 1.3387

Sell: 1.3370 Take profit: 1.3242

Sell: 1.3238 Take profit: 1.3195

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For the Australian dollar / US dollar pair, the key levels on the H1 scale are : 0.6872, 0.6846, 0.6810, 0.6781, 0.6734, 0.6713 and 0.6677. Here, we are following the formation of the ascending structure of February 4. At the moment, the price is in the correction zone. The continuation of the movement to the top is expected after the breakdown of the level of 0.6781. In this case, the target is 0.6810. Price consolidation is near this level. The breakdown of the level of 0.6810 should be accompanied by a pronounced upward movement. Here, the target is 0.6846. For the potential value for the top, we consider the level of 0.6872. Upon reaching which, we expect a pullback to the bottom.

Consolidated movement is expected in the range of 0.6734 - 0.6713. The breakdown of the latter value will favor the formation of a downward structure. Here, the potential target is 0.6677.

The main trend is the formation of the ascending structure of February 4

Trading recommendations:

Buy: 0.6781 Take profit: 0.6810

Buy: 0.6812 Take profit: 0.6846

Sell : Take profit :

Sell: 0.6710 Take profit: 0.6677

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For the euro / yen pair, the key levels on the H1 scale are: 122.22, 121.89, 121.41, 121.07, 120.60, 120.37, 120.05 and 119.75. Here, we are following the formation of the ascending structure of January 30. The continuation of the movement to the top is expected after the breakdown of the level of 121.07. In this case, the goal is 121.41. Price consolidation is near this level. The breakdown of the level of 121.45 will lead to a pronounced upward movement. Here, the goal is 121.89. For the potential value for the top, we consider the level of 122.22. Upon reaching this level, we expect a pullback to the bottom.

Short-term downward movement is possibly in the range of 120.60 - 120.37. The breakdown of the last value will lead to an in-depth correction. Here, the goal is 120.05. This level is a key support for the top.

The main trend is the upward structure of January 30

Trading recommendations:

Buy: 121.08 Take profit: 121.40

Buy: 121.43 Take profit: 121.87

Sell: 120.60 Take profit: 120.39

Sell: 120.35 Take profit: 120.05

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For the pound / yen pair, the key levels on the H1 scale are : 145.43, 144.73, 144.23, 143.50, 143.26, 142.30, 141.87, 141.38 and 140.90. Here, we are following the formation of the ascending structure of February 4. The continuation of the movement to the top is expected after the price passes the noise range of 143.26 - 143.50. In this case, the goal is 144.23. Short-term upward movement, as well as consolidation is in the range of 144.23 - 144.73. For the potential value for the top, we consider the level of 145.43. Upon reaching this level, we expect a pullback to the bottom.

Consolidated movement is expected in the range of 142.30 - 141.87. The breakdown of the last value will lead to an in-depth correction. Here, the goal is 141.38. This level is a key support for the top.

The main trend is the initial conditions for the top of February 4

Trading recommendations:

Buy: 143.50 Take profit: 144.20

Buy: 144.25 Take profit: 144.70

Sell: 141.85 Take profit: 141.40

Sell: 141.36 Take profit: 140.90

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

EUR/USD. February 6. Results of the day. Christine Lagarde noted ECB's problems on monetary policy and the euro declined

4 hour time frame

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Amplitude of the last 5 days (high-low): 32p - 79p - 58p - 31p - 54p.

Average volatility over the past 5 days: 51p (average).

During the last trading day of the week, the EUR / USD currency pair resumed its downward movement, without even being able to correct normally against a three-day fall. Thus, the euro continues to become cheaper against the US dollar and entered the 100-point zone before the two-year low of the pair. At the same time, previous local lows have been broken through and updated today. Here, we are talking about the lows of November 14, November 29 and January 29. Thus, formally and from a technical point of view, nothing should prevent the European currency from continuing to decline. However, we continue to insist that a reversal to the top and another upward correction of the pair are very likely in the area of 1.0879 - 1.0979, which is just based on the fact that the bears will refuse to sell the euro again at such low price values. Let's see how it will be this time. This factor cannot work in favor of the European currency forever. Sooner or later, the bears will surrender and continue to get rid of the euro, moving the pair even further down to price parity with the US dollar.

For today, macroeconomic statistics can be considered to have been non-existent. Several minor reports in Germany and the USA were published, which did not cause much attention from the participants. The most interesting was the report on production orders in Germany, which collapsed by 8.7% in annual terms and 2.1% in monthly terms in December. This mainly means that the industrial sector of Germany - the leading economy of the European Union - remains in an unfortunate state, despite a slight increase in business activity, judging by the latest data. This also indicates that industrial production in Germany may continue to slow down, because if orders are reduced, then production volumes are reduced. Well, and accordingly, we may well expect a reduction in the pan-European indicator of industrial production, on which very much depends, for example, GDP, which in the Eurozone has already recently declined to 1%. In general, the report itself did not seem to cause additional pressure on the euro, but showed how bad things are in the Eurozone once again. Nevertheless, the euro later continued its decline anyway.

Meanwhile, ECB Chairman Christine Lagarde made a second statement today. Her speech yesterday was almost entirely devoted to the "coronavirus" and its possible impact on the world economy. Here are the obvious conclusion from Christine's speech: the world economy began to feel relief after signing a trade deal between China and the United States, but the coronavirus almost completely eliminates the entire positive effect of this deal and adds a huge number of potential risks and threats to the global economy. Today, the head of the ECB discussed the topic of monetary policy and, it seems that the euro currency went to dominate the downside again after her statements. In addition, the Chairman of the European Central Bank noted that low interest rates and weak inflation significantly limit the ability of the regulator to influence monetary policy. And in the event of an economic downward turn caused by for example, with the coronavirus or a new escalation of the trade war between China and the USA, the ECB, like other world banks, will not be able to effectively and fully oppose it. In fact, Lagarde acknowledged that the EU economy already has serious problems, the Central Bank has almost completely exhausted its arsenal of available tools to stimulate the EU economy; however, mostly all measures had only a temporary positive effect. Lagarde also said that "the economy of the Eurozone continues to grow, but at a slow pace, stable domestic consumption is supporting the economy of the European Union, the basic economic indicators of the Alliance are gradually improving." In this statement, from our point of view, Lagarde tried to calm the markets a little but she did not succeed.

After today's events, we can only emphasize the weakness of the Eurozone economy once again and the much more optimistic state of the US economy. No matter how Donald Trump boasts about the achievements of his administration, it should be recognized that many indicators do show steady growth. However, GDP also decreases in its growth rate, but it is 2.1%, and not 1.0% at the moment in the Eurozone. Meanwhile, industrial production is declining in America, but does not have such a negative impact on the economy as in the European Union. Thus, from our point of view, the euro logically resumed its decline, and we can only guess whether this time the "paradoxical situation", which we have repeatedly described, will stop the decline of the euro.

From a technical point of view, all indicators are still directed down. Thus, you can stay in short positions until a rebound from any target or a reversal of the MACD indicator upwards (which can also be discharged, so you need to wait for a parallel price increase).

Trading recommendations:

EUR/USD continues to move down. Thus, it is now recommended to sell euro currency with targets at levels 1.0956 and 1.0946, until the MACD indicator reverses or rebounds from any of the targets. Moreover, it will be possible to consider the purchase of the euro / dollar pair with the goals of 1.1048 and 1.1128, if traders manage to return the quotes of the pair above the Kijun-sen and Senkou Span B. lines.

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 dashed lines with price symbols.

Pivot Level:

Yellow solid line.

Volatility Support / Resistance Levels:

Gray dotted lines without price designations.

Possible price movements:

Red and green arrows.

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

EUR/USD: China announced reducing duties on goods from the US and new tariffs will be valid from February 14; Germany's manufacturing

The news that the Chinese authorities intend to halve duties on American goods did not greatly affect the markets, providing only slight support for the European currency in the morning.

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As indicated in the message of the Ministry of China, China will reduce duties on imported US goods to 5% from 10% from February 14 this year. In addition, duties will be reduced for a number of goods to 2.5% from 5%. The total duties will be reduced by $ 75 billion, as was noted in the recently signed trade agreement.

However, the optimism of euro buyers quickly faded after data showing a continuing problem in the manufacturing sector in Germany, which is going through hard times. A number of experts have already hurried to declare that production is beginning to recover gradually, as evidenced by the PMI for this sector, published at the beginning of the week, but it is still very, very early to talk about real changes. Thus, this is supported by a report on a sharp reduction in orders in the German manufacturing sector last December.

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According to the German Federal Bureau of Statistics Destatis, German manufacturing orders in December declined immediately by 2.1% compared with the previous month after declining by 0.8% in November. At the same time, economists had expected orders to increase by 0.7%. But compared to the same period of the previous year, orders in the manufacturing sector declined by 8.7%.

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The only thing the economy has to rely on is domestic orders, which continue to show stable growth, keeping the indicator from a larger decline. The report indicates that domestic production orders in December 2019 increased by 1.4%, but external ones immediately declined by 4.5%. Tomorrow, we will follow with you the German industrial production report for December this year, which will complement the big picture.

Moreover, the outbreak of coronavirus in China adds to the problems, which will affect the situation in the manufacturing sector of Germany and delay the restoration of activity. However, a small reassurance for economists is the fact that the data at the end of last year and the beginning of this is subject to volatility in connection with the celebration of Christmas and they must be trusted with some caution.

As for the technical picture of the EUR/USD pair, it remained completely unchanged compared to the morning forecast. I noted that the euro stopped at 1.0990, and a lot depends on this range. If the bulls fail to keep this area, then the pressure on risky assets will most likely resume with renewed strength, which will lead to the renewal of the lows 1.0965 and 1.0940. On the other hand, if consolidation around the level of 1.0990 confirms a major limit player, then a trading instrument may rebound to the resistance area of 1.1025 and 1.1050.

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

Technical analysis of USD/CAD on February 6, 2020

Hello dear traders!

In today's article on the "Canadian" currency, we will analyze the main technical differences of the USD / CAD currency pair, and try to find acceptable entry points for opening positions on this currency pair. Let's start with the results of last week.

Weekly

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Last week, the pair showed growth and as a result of which, it returned above the seemingly broken pink support line 1.2061-1.3041. As expected, this line was already truly broken and the price consolidated underneath, but it was not there. As a result of a fairly decent growth, the pair broke the lines of the Tenkan and Kijun of the Ichimoku indicator, and they have with them the 89 exponential moving average, closing trading at 1.3233, which is located within the cloud of the Ichimoku indicator.

I believe that this is a good attempt to continue the upward trend. In this regard, USD/CAD confirms its intention to increase at the current weekly trading. Now, trading is carried out near the symbolic level of 1.3300, where the green line of resistance and the downward trend 1.4690-1.3563 passes a little higher.

Moreover, in case that there is a breakdown of this line and the quote consolidates above it, with a 99.9% confidence, then we can assume that buyers, i.e. bulls, have control over the pair.

Alternatively, in the case of a bearish reversal signal appearing under the designated line, the growth is likely to come to its end and USD/CAD will turn in a downward direction.

Daily

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On the daily chart, it looks quite bullish. The Fibonacci grid for the current growth of 1.2950-1.3307 was stretched, and the rate to continue strengthening is expected. At least, there are no signals for a reversal or correction yet. Here, we have quite a decent upward trend.

Now, for the bulls in a pair, the main task will be to pass the green line of resistance - this will play a huge role in the future of USD/CAD. The breakdown and consolidation above will indicate an even more pronounced bullish scenario and higher growth goals.

If the trend changes in the pair or it reverses for correction, the nearest goal will be the level of 23.6 Fibo, where the Tenkan line of the Ichimoku indicator is also located. The farther targets below are the 200 exponent located at 1.3195, and the level of 1.3170, where 32.8 is Fibo, and the level 38.2 is slightly lower than the current growth.

H4

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On the 4-hour timeframe, a bull trend is clearly expressed. In order not to discuss long and not paint the situation as it is taking time, I will turn to specific trading recommendations for USD/CAD.

Naturally, the main idea for trading on USD/CAD pair is to consider purchases, but not at the peak of the market, but after pullbacks and corrections, because of such a technical picture, which is already observed on three charts in a row, and, starting from the weekly.

Moreover, I propose to consider the opening of long positions in the pair near the levels: 1.3235, 1.3195, 1.3180 and 1.3165. In the event that the last level is broken and the course consolidates below it, we will consider sales, and then only after the presence of the corresponding signals of Japanese candlesticks.

So far, that's all for the technical side.

However, do not forget that there will be data on the labor market of the USA and Canada tomorrow at the same time at 13:30 (Universal time). I believe that these statistics will have a determining influence on the results of the current trading week, so it's too early for the bulls of USD/CAD to get excited.

See you soon!

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

Gold could reach $2,000 an ounce this year

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Gold demonstrates a moderate "bullish" attitude for the second day in a row, ignoring such an unfavorable factor as a revival of risk appetite due to optimistic reports on the fight against coronavirus. Theoretically, this was supposed to weaken the interest of players in the yellow precious metal as a safe asset.

The increase in the yield of the treasuries against the background of the increased risk appetite did not also impress the "bears" and did not affect the gold in any way.

Moreover, even the strengthening of the dollar, which is confidently heading upwards due to good statistical data on the United States, could not hinder the growth of precious metals.

Now, gold is receiving support at last year's highs near $1,550. As is often the case in the markets, the former serious resistance has become support.

"The bullish trend in the gold market will continue in 2020, and the precious metal will become a favorite in terms of profitability growth," experts at Bloomberg say.

"One of the main reasons for the increase in the cost of gold this year will be the weakening of the Celestial economy because of the coronavirus epidemic. Under these conditions, gold will be used as a protective asset. The recent rise in the price of precious metals in the area of six-year highs can be considered as a market recovery. Now, the next level of resistance will be the mark of $1,700 per ounce," they said.

However, there may be something more than a craving for "safe havens" on fears of a coronavirus from China behind the growth of gold.

Last year, the quotes of precious metal increased significantly due to the easing of the monetary policy of leading central banks. At the same time, lower regulators of interest rates and the resumption of their purchases of assets on their balance sheets as a result stimulate inflation. In turn, the acceleration of price growth has become more noticeable since the middle of last year, which is forcing investors to look for alternatives to bonds as a way to protect portfolios from inflation, against the backdrop of near-zero rates.

In addition, a similar traction also explains the record volumes of assets in the "golden" ETFs, the inflow of funds to which increased at the end of last year.

Central banks are also building up gold reserves. Behind their actions is the desire to diversify their reserves amid growing concern over the increasing debt burden of the United States, Japan and the eurozone.

Now, the question arises on the agenda: what will happen next with accumulated debts? First of all, thoughts come to mind that the easiest way to reduce the debt burden will be the desire of states to put pressure on their own currency. This is a kind of analogue of competitive devaluation, only in a more manageable form, through the super-soft monetary policy of central banks. A side effect of this strategy will be the appreciation of commodity assets, primarily gold, as insurance against inflation.

In 2019, the precious metal rate increased by about 17%. The repetition of this dynamics in 2020 opens the door to growth in the region of $ 2,000 per 1 ounce, which will be higher than the record levels of 2011.

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

EUR/USD. Inspiring ADP report: Nonfarm can exceed expectations

The euro-dollar pair is still holding in the area of the 10th figure, despite a group of negative fundamental factors. A strong ADP report, weak production data from Germany, the "coronavirus factor", positive news from China - all these circumstances either put pressure on the euro or strengthen the US currency. Friday's Nonfarm may strengthen the downward movement of EUR/USD, and in this case, the bears of this pair will finally fix in the area of the 9th figure, with the prospect of a further decline to the lows of last year.

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Let me remind you that the dollar strengthened throughout the market according to the results of the January meeting of the Fed. Jerome Powell did not surrender once again from the pressure of US President Donald Trump, who called on the Central Bank again to lower the interest rate "two years late." However, the American regulator disappointed the head of the White House - he did not only soften monetary policy, but also erased the fears of many traders about such intentions in the foreseeable future (at least until the summer of this year). On the other hand, the Fed expressed concern about inflation and production indicators. Powell also reminded market participants that the Fed "will not even think about raising the rate" until inflation fixes in the area of the target two percent level.

In other words, the focus of attention of traders shifted to macroeconomic reports from the United States again. Moreover, after the weakening of panic regarding the spread of coronavirus, the market "remembered" the problems of the American economy. Therefore, key statistics can now cause quite strong volatility for the EUR/USD pair. In this context, tomorrow's Non-farm will play a crucial role in determining the direction of further price movement.

Let me remind you that the December data on the growth of the American labor market was disappointing: almost all the components entered the "red zone", reflecting unhealthy trends in the labor market. Only the unemployment rate remained unchanged (at around 3.5%). But in this case, this is not an encouraging fact: this indicator does not respond as quickly to the current situation, as it relates to lagging economic indicators. At the same time, more operational figures were not so optimistic - all components came out below forecast values.

Thus, the indicator of employment growth increased by 145 thousand instead of an increase of 165 thousand. The number of jobs in the manufacturing industry has completely decreased (by 12 thousand). Over the past six months, this indicator has been declining for the second time in the negative area - in particular, it declined immediately by 49 thousand in October. But especially in early January, the nonfarm inflation component was disappointing — the level of average hourly wages. This most important indicator for the Fed was at around 0.1% on a monthly basis (the worst result since last September, when it declined to zero) and 2.9% on an annual basis (worst result since July 2018).

According to the general forecast, January's Nonfarm will show a more significant result. The employment growth rate should rise to 160 thousand, and the average hourly wage should return to a three percent mark. At the same time, the growth rate of those employed in the manufacturing sector of the economy can demonstrate a negative result again, although not as significant as in December (the indicator should be reduced by 4 thousand).

In addition, the published ADP report allows a more optimistic look at tomorrow's release. According to the estimates of specialists of this agency, the number of new jobs immediately increased by 290 thousand, with a preliminary forecast of growth to 155 thousand. Thus, it can be assumed that January's Nonfarm will also exceed forecast levels with a high degree of probability. However, it is worth noting here that if salaries disappoint again, the overall positive effect of a strong release can quickly fail. Therefore, the inflationary component of Nonfarm will play the lead.

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It is also worth noting that the EUR/USD pair is under pressure not only due to the strong dollar, but also due to the weakening single currency. In this regard, published data on the growth of production orders was significantly disappointing. The indicator collapsed to -2.1%, instead of projected growth to the level of + 0.6%. This is the most negative result for the last 11 years (to be more precise, the last time the indicator declined to such low values in the fall of 2009). Here, it is necessary to recall that inflation in Germany also slowed down to negative values (on a monthly basis), exerting background pressure on the euro.

Nevertheless, the news from China indirectly supported the dollar. Today, it became known that Beijing will halve the customs tariffs imposed by China on September 1. On the one hand, such a step was provided for by a trade transaction (first phase). On the other hand, the fact of the implementation of the agreements reached maintains interest in risk, including the dollar.

Thus, the EUR/USD pair retains the potential for further decline and the pair may be below the first support level of 1.0980 (the lower line of the BB indicator on the daily chart) tomorrow. If the bears consolidate below the specified target, then the chances of sellers to test the 8th figure will increase in many ways.

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