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The EUR/USD pair on Friday performed an increase to the corrective level of 161.8% (1.1357), rebounded from it, and began a new fall towards the level of 1.1250. Thus, bull traders failed to close above the level of 1.1357 on two attempts and start new growth. The information background on Friday was very weak. The speeches of Christine Lagarde and Janet Yellen did not give traders new information that could be worked out. Therefore, the pair remained between the levels of 1.1300 and 1.1360. She will have to get out of this corridor this week. Fortunately, there will be many more important events and reports than last week. First of all, let's look at the morning reports on business activity in the European Union. Business activity in the service sector continued to decline and in January dropped to the level of 51.2. Business activity in the manufacturing sector, on the contrary, increased to 59.0 points, but in the current circumstances, it is the service sector that is more important. The manufacturing sector experienced serious problems only at the very beginning of the pandemic when business activity in it fell to 10-20 points.
However, it subsequently managed to adapt to the realities of the pandemic and eternal quarantines. But the service sector is physically unable to do this. If there is a quarantine or a new wave of a pandemic in the country, then many public places are either closed, or people themselves do not want to take risks and stay mostly at home. The same applies to the spheres of tourism, travel, and hotel business. They feel the most pressure on themselves. Therefore, a drop in business activity in the service sector can be a wake-up call. I would also like to note right away that the Fed will hold a meeting this week and its results will be announced. Traders will be waiting for new "hawkish" decisions and statements from the American central bank. And most likely, they will receive them. And this means that the US dollar may continue to grow this week. There will also be a report on GDP in America for the fourth quarter of 2021, which is also important. Especially in the context of a new increase in the number of diseases, which was observed just at the end of the fourth quarter.
On the 4-hour chart, the pair has secured under the corrective level of 127.2% (1.1404), so it retains the chances of a further fall in the direction of the corrective level of 161.8% (1.1148). The bullish divergence of the CCI indicator allowed the pair to grow slightly, but even to the level of 1.1404 bull traders failed to reach. I think the fall will resume this week unless the Fed gives traders an unpleasant surprise.
News calendar for the USA and the European Union:
EU - index of business activity in the manufacturing sector (09:00 UTC).
EU - index of business activity in the service sector (09:00 UTC).
US - index of business activity in the manufacturing sector (14:45 UTC).
US - PMI index for the service sector (14:45 UTC).
On January 24, the calendars of economic events of the European Union and the United States contain two entries each. European business activity indices have already been released, it remains to wait only for the American ones. But in general, I think that the influence of the information background on the mood of traders today will be very weak.
EUR/USD forecast and recommendations to traders:
I would recommend selling the pair if there is a clear closing under the trend line on the hourly chart, with a target of 1.1357. Now, these trades can be kept open with a target of 1.1250. I recommend buying the pair now if the closing above the level of 1.1404 on the 4-hour chart is completed.
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