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EUR/USD. December 15. Results of the week. "Fragile" truce between Beijing and Washington.

4 hour time-frame

analytics5df6c807a206d.png

Amplitude of the last 5 days (high-low): 31p - 70p - 25p - 35p - 75p.

Average volatility over the past 5 days: 48p (average).

On Friday, December 13, EUR/USD currency pair began a round of downward correction after it had ideally developed the resistance level of 1.1173 and the upper line of the volatility channel - 1.1183, which was indicated as early as Friday morning. However, it should be recognized that for most of the last trading day of the week, the euro/dollar currency pair did not openly know what to do. Traders were confused as the Euro currency, during the night trading, managed to gain a foothold in the framework of the continuing upward trend (which raises great doubts from the point of view of fundamental validity) solely due to the crushing victory of the Conservative Party in the UK elections. That is, it is safe to say that the pound on the most important day of the year for itself simply dragged up and the euro. It is in this interpretation, because if the euro also responded to Brexit events, then it would start to rise in price simultaneously with the pound, that is, at least a few weeks earlier. Thus, the nightly growth of the Euro currency on Friday can be called a coincidence and does not fit into the big picture. Further, a much more logical correction began at the American trading session after the not quite justified growth of the European currency. Firstly, the end of the week is the best time to take profits on previously opened positions. Secondly, a point was immediately set in several cornerstones on Friday that worried and worried market participants for a long period of time. It's all about the same parliamentary elections in Great Britain (markets waited for them for about 2 months), about Brexit, which should now be realized before the end of January (markets have been waiting for this for more than three years), as well as the de-escalation of the trade conflict between the United States and China, which on Friday the 13th, agreed on a kind of ceasefire, but did not sign any agreements, even in the "first phase". That is, in fact, we know only from the words of the American president that the parties have agreed and will not introduce new duties against each other. In addition, part of the duties that are already in effect will be canceled.. According to media reports, China and the States should sign the relevant document in January. That is, purely hypothetical since the situation may change several more times until January.

Moreover, all the conditions that were announced by the States (not China and the States, but only the States) sound like this. Washington upholds 25% of trade duties that affect $ 250 billion worth of imports from China to the United States. Washington will lower $ 120 billion from China's import duties from 15% to 7.5%. And from December 15, it refuses to introduce new duties in the amount of another 160 billion dollars. In turn, Beijing is committed to buying more agricultural products, goods and services from America. We are talking about the amount of about $ 100 billion a year. However, it's hard to say how the issues of intellectual property protection and America's access to the financial sector of China were resolved. We believe that the agreements between Donald Trump and Xi Jinping are a very good sign for the entire world economy. This agreement gives real hope that the parties will continue the dialogue and eventually cancel all duties against each other and the trade war will end. However, from our point of view, it is still very early to open and drink champagne in this matter. Firstly, we would like to draw attention to the fact that more than half of imports from China remain under US duties. That is, in fact, the States only canceled half of the second package of fees in the amount of about $ 60 billion, that's all. The very first package of duties remained in operation. Thus, the global economy will continue to suffer due to the trade war between China and the United States. Secondly, we have already witnessed a situation where Beijing and Washington seem to have agreed, but at the last moment, Trump declared that "China is playing a dishonest game" or "does not comply with the terms of the agreement", introduced new duties and the trade war escalated. Thus, a trade war can erupt with renewed vigor at any time until the parties sign the agreement. Moreover, both sides note that the "first step" has been taken, but there are still a lot of complex and difficult issues that need to be addressed.

Based on the previously mentioned, we believe that the best reflection of the de-escalation of the trade conflict between the United States and China will be an improvement in macroeconomic indicators in both America and the European Union (since we are interested in the currencies euro and dollar). This has a more indirect relation to America, because macroeconomic statistics in the United States is at a fairly good level after the Fed has taken actions. However, everything is very bad in the EU, if we take economic indicators. It is the de-escalation of the trade conflict (if it is not only on paper and in sufficient volume) that can positively affect the performance of the EU economy. Thus, we will find out in the next few months if there is any reason for the global economy from the fact that Beijing and Washington have agreed?

Trading recommendations:

The EUR/USD pair started a new round of correction against the upward trend. Thus, long positions formally remain relevant with the goals of the resistance level of 1.1173 and 1.1183, but only after the completion of the current correction and the back fixation of the bulls above the Kijun-sen critical line. Now, it is formally possible to sell a pair of euro/dollars, since the Kijun-sen line has been broken through, but with targets 1.1079 and Senkou Span B line in small lots. Tomorrow morning, new and more accurate targets for trading will be determined.

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 indicator 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