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Hello, dear traders!
First, let me say a few words about the most important international events.
The number of deaths from coronavirus is growing steadily. At the moment, 361 people have already died. The same applies to those who are infected with this virus. More than 1,700 people are now infected. By special order, the railway connection between Russia and China is temporarily suspended. A hospital for 1000 beds for those infected with this terrible disease was also built, although not in six days as previously declared, but in ten, which is still very fast.
Today, the election campaign officially begins in the US. The election race starts in Iowa, and if everything is clear with the nominees, then there are as many as 11 candidates in the Democratic Party. Of course, almost all of them will leave the race, but in my opinion, the eleven candidates who will start the campaign is still too much.
If these international events will have an impact on the currency market, it is just to a minimum extent. But who knows. Let's wait and see.
Usually I start my Monday reviews with the results of the past week and the corresponding schedule. However, given that the market closed January's trading last Friday, it is impossible not to see what picture is emerging on the monthly chart of the EUR/USD currency pair.
Monthly
Due to the new year and Christmas holidays, which led to a large number of days off, January is not something that passed but just flew by. It would seem that only yesterday, we were preparing for the new year and laid festive tables, but bang! Today is already February 3 on the calendar!
Well, let's take a look at the results which the main currency pair of the forex market, EUR/USD, completed in the January trading.
At the end of January, EUR/USD declined and closed at 1.1090. However, there are several positive aspects for the single European currency. First, the January auction ended above the important psychological and technical level of 1.1000. This factor is encouraging and may indicate that the market does not want to trade below this important mark. Secondly, the January candle has a rather impressive lower shadow. During the January trading, the bears pushed the quote to 1.0992, but could not keep trading below 1.1000, which indicates their weakness or the strengthening of their opponents.
And so, the January auction for EUR / USD was held in the range of 1.0992-1.1223. I believe that these values will become the reference points for next month's trading. A move below 1.0992 will indicate a bear market for the pair, while a rise above the January highs of 1.1223 will indicate a willingness to move to higher prices.
The closing of last month's trading above 1.1000, as well as the long lower shadow of the January candle, are more inclined to a possible February increase. However, there is still no clear signal for the implementation of the bullish scenario on the monthly timeframe, so we will move to smaller time intervals.
Weekly
Last week's trading for major currency pairs took place in different directions. The euro and yen strengthened against the US dollar, while commodity currencies, on the contrary, showed a decline.
As for the EUR/USD pair, it grew by 0.59%, which can be considered a fairly good result. Trading on January 27-31 closed above the Kijun line of the Ichimoku indicator, which can also be attributed to the success of players in increasing the rate.
Now, to continue the upward trend, euro's bulls need to break through the Tenkan line and the resistance at 1.1117. If they succeed, then the testing for a breakdown of 50 MA, which takes place at 1.1150, is ahead. The highest task, as noted above, will be the census of January highs at 1.1223.
To implement a bearish scenario, lowering the price below the Kijun line (1.1059) is needed, and then a re-test of the 1.0992 support. Only a breakdown of this level and a consolidation below it will indicate bearish control over EUR/USD.
As for the weekly schedule, for me, the continuation of the price increase is the most possible option for the February 3-7 trading.
Daily
On the daily chart, we see that on January 31, the pair made a serious upward movement from 1.1016 to 1.1095. As a result, the Tenkan line of the Ichimoku indicator was broken, and more importantly, the trades of the last day of January closed above the previously broken green support line of 1.0879-1.0981. In my opinion, this is an important enough moment to continue rising, however, in the area of the green support line, strong resistances are concentrated in the form of the line itself and the lower border of the Ichimoku cloud. Also, this is where the 89 exponential moving average is located, which, as we can see, has a fairly serious resistance to continue the growth.
The following conclusion can be drawn from the daily schedule. Euro's bulls must fix the rate above the green support line (in this case, fix its false breakout) above 89 EMA, break through sellers' resistance at 1.1095, and enter the limits of the Ichimoku cloud, where we finish the day's trading. In this case, the chances of continued strengthening will increase significantly, but If it is not possible, then today's trading will close under the green line at 1.0879-1.0981. Moreso, the further growth of the EUR/USD will be in question.
All in all, based on the situations on the three largest timeframes, today, I will refrain from specific trading recommendations. Let's wait for the outcome of today's trading session.
Tomorrow, we will look at the four-hour and hour charts, in the hope of finding suitable and technically sound points for entering the market.
Have a successful day!
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