28.01.202108:15 Forex Analysis & Reviews: Forecast for EUR/USD, January 28, 2021

The euro was supposed to drop yesterday due to the quite predictable results of the meeting of the Federal Open Market Commission. However, everything was somewhat different. The decline of the euro began much earlier and for completely different reasons. As is usually the case, the main reason for its decrease is the coronavirus. To be more precise, it is the vaccination program, which is not going as well as the EU government had envisaged. Apparently, Europe's plan for quick mass vaccination was too grandiose. So, now it is facing many problems. To put it mildly, vaccination is going much slower than planned. This means that the European economy will recover much more slowly than predicted. Besides, all sorts of restrictive and quarantine measures will remain in force until a sufficiently large number of people are vaccinated. Taking into account that the mass vaccination program is moving very slowly, then it will not be soon. At the same time, the results of the FOMC meeting were in line with the forecasts. The Federal Reserve did not announce any changes in the near future. Fed Chairman Jerome Powell said that the economic recovery will depend on the success of the mass vaccination. However, neither investors nor experts took notice of his words. Yet, the situation in the US with mass vaccination is not better than in Europe. Therefore, the Federal Reserve is unlikely to wind down the quantitative easing program in the near future.

What can we expect today? On the one hand, the main news will be the flash estimate of the United States' GDP for the fourth quarter. The economy is expected to grow by 4.2%. If so, this result will be quite positive and may stimulate the Us dollar's growth. However, the data is only preliminary and the GDP growth is not so impressive, given the scale of the strong drop of the economy due to the coronavirus epidemic. Investors are now much more concerned not about how the economy recovered at the end of last year but about how this process will go this year. This depends on the dynamics of the labor market. Thus, they are focusing on the data on initial jobless claims, especially since the forecast is clearly not encouraging. The number of initial jobless claims may remain unchanged, which of course is unlikely. However, the number of continuing jobless claims is projected to rise from 5,054K to 5,250K. Given that unemployment is already quite high, the increase in the number of continuing jobless claims will show that the labor market has stopped recovering. So the economic recovery is dragging on, which will have a negative impact on the US dollar.

The number of continuing jobless claims (US)

The EUR/USD pair fell sharply to the low of January -1.2050/1.2060.

The market dynamics amounted to more than 110 points, this is the highest activity in more than two weeks.

Taking into account the current level of the quote, we can see that market participants follow the structure of the pullback from the area of 1.2050/1.2060, where the previous level of resistance was 1.2130.

Considering the trading chart in general terms, especially the daily period, the rapid movement of quotations, e.g. the January correction move, are in the structure of a medium-term uptrend.

So, the pair may pull back from 1.2050-1.2060 where the formation of a time amplitude in the range of 1.2085/1.2130 is not excluded. The movement of the pair will become more distinct when it breaks through the levels of 1.2085- 1.2130.

From the point of view of an indicator analysis, we see that the indicators of technical instruments on the hourly and daily periods still signal the downward movement due to the correction and rally of the past day. Minute intervals indicate a rebound from 1.2050/1.2060. So, according to an indicator analysis, it is recommended to open short deals.