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21.01.202000:36 Forex Analysis & Reviews: EUR/USD. January 20. Results of the day. China has signed an unfavorable trade deal. Will the answer come in another form?

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4-hour timeframe

Exchange Rates 21.01.2020 analysis

Amplitude of the last 5 days (high-low): 34p - 41p - 44p - 45p - 57p.

Average volatility over the past 5 days: 45p (average).

The first trading day of the new week for the EUR/USD pair was held in quiet and calm trading with a total volatility of as much as 25 points. Not a single macroeconomic report has been planned for today in either the United States or China, which explains the low activity of market participants on Monday. At the same time, the anti-trend correction characteristic of Mondays has not begun today. The euro continued to simply become cheaper after a very obscure attempt to start a correction. Thus, we believe that this is a significant moment, but we should not overestimate it. The indicative fact is that traders are not ready to reduce short positions now, which means that there is a high probability that the downward trend will continue to form. At the same time, today's decline in quotations of the euro/dollar pair may just be an accident. Therefore, we recommend that traders simply stay in euro-currency sales until the formation of correction signals.

Meanwhile, analysts and experts around the world continue to analyze the agreement between the United States and China. The fact is that now it is precisely from this trade agreement that the macroeconomic indicators of the European Union and the United States (as well as China) that we are interested in will depend, which will affect the movement of currency pairs. According to many experts, China has concluded the "first phase" of the trade agreement almost "at gunpoint". It seems that China no longer believes that Donald Trump will not be able to be re-elected for a second term and therefore decided to try to negotiate with the conflicting US president. The first phase is absolutely in favor of America. However, it is difficult to imagine that China will not take any "retaliatory step". By and large, the situation is as follows: China and the United States conducted trade in accordance with market realities and rules; Trump decided to balance the trade balance with China and imposed sanctions, which began to hit acutely on Chinese production, since China is an export-oriented country, and the United States is one of its largest markets. From the point of view of market mechanisms, Trump's step with the trade war is an unfair play. On the other hand, China can also be blamed for many sins, some of which are understandable and obvious to absolutely everyone. For example, theft of intellectual property, theft of patents. We all know how many brand fakes are produced in China. Some are exact copies of the products of all world famous brands. Now, according to the agreement with the US, China takes on a whole list of obligations:

1) Beijing guarantees protection of intellectual property.

2) China will open access to its financial sector from April 1, will allow it to engage in investment projects on its territory and trade securities with foreign banks and companies.

3) It guarantees the provision of licenses to various electronic payment companies (Mastercard, Visa).

4) Guarantee purchases of $200 billion or more from the United States over the next two years.

5) Refuses to artificially devalue the renminbi.

Under all these conditions, most of the duties on Chinese imports remain in force. That is, Trump left the advantages with him and now has every reason and opportunity to continue to exert pressure on Beijing through the remaining duties in order to force the signing of the agreements of the "second phase", "third phase". The most interesting thing is what Beijing will answer, since, according to many experts, China is used to responding to its opponents on those battlefields where it is stronger. It is understood that in a dispute with Washington, this battlefield will not be trade relations between countries.

However, what China will do in the future is not too interesting, as it may still do nothing and will not have to. Already this week, hearings will begin on the case of the impeachment of Trump in the Senate, and although there are practically no chances for his resignation, nevertheless, this event should not be overlooked. So far, Trump has answered with a six-page report to the 111-page document of the Democrats, in which he once again criticized the impeachment process and stated that the whole thing is "purely political".

And while the battles between Trump and the Democrats continue, the Washington Post calculated how many times in 1095 days of his reign, President Donald Trump lied or made a misleading statement. According to the study, this happened 16,241 times. That is, the US president lied almost 15 times a day. It is difficult to say how true and accurate this study is, as well as what exactly its authors mean by "misleading", but we see that the fight against Trump in the United States is in full swing.

The technical picture of the instrument continues to indicate a downward trend. There are no signs of correction. The fundamental background remains on the side of the US currency (the only thing that makes one doubt it is a decrease in the growth rate of industrial production in America).

Trading recommendations:

EUR/USD continues to move down. Thus, it is recommended to keep open shorts with targets 1.1060 and 1.1047. It will be possible to consider purchases of the euro/dollar pair no earlier than the traders of the Senkou Span B line overcome with the first goal the resistance level of 1.1203.

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 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.

Paolo Greco
Analytical expert of InstaForex
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