Home Forex Forex Market Analysis Daily F.X. Analysis, January 05 – Top Trade Setups In Forex –...

Daily F.X. Analysis, January 05 – Top Trade Setups In Forex – ISM Manufacturing PMI In Focus!


On the news side, eyes will remain on European Unemployment Change and the ISM Manufacturing PMI manufacturing data from the U.S., Both of the figures, are expected to drive moves in Euro and dollar today.

Economic Events to Watch Today  


EUR/USD – Daily Analysis

Today in the early European trading session, the EUR/USD currency pair successfully extended its previous session winning streak and remained well bid around above the 1.2250 level as the U.S. dollar remains on the bearish track despite coronavirus concerns and weak China data. However, the losses in the U.S. dollar were triggered after the U.S. Food and Drug Administration said that 2-different mRNA vaccines now show the extraordinary result of about 95% in preventing Covid-19 infection in adults. 

Apart from this, the Federal Reserve’s expectations would keep rates low for a prolonged period also weighs on the greenback and contributes to the currency pair gains. Meanwhile, the probability of an additional U.S. financial aid package also played its major role in undermining the U.S. dollar. In that way, the U.S. dollar weakness was seen as one of the key factors that benefitted the EUR/USD currency pair.

 In contrast to this, the latest B117 strain of COVID-19 lead to the fresh lockdown restrictions on economic activity in Europe and the U.K., which keep raising doubts over the economic recovery and turned out to be one of the key factors that kept the lid on any additional gains in the currency pair. As of writing, the EUR/USD currency pair is currently trading at 1.2262 and consolidating in the range between 1.2246 – 1.2278.

The sentiment around the global equity market has been flashing red since the day started amid worries about the continuous surge in new COVID-19 cases. Also fueling the risk-off mood was the cautious sentiment ahead of the Georgia election and the Sino-American tussle. As per the latest report, Japan saw a record number of COVID-19 cases in recent days, which in turn, Prime Minister Yoshihide Suga said that he would consider declaring a fresh state of emergency in the Tokyo area. 

Across the ocean, the U.K. Prime Minister Boris Johnson also gave warnings over the possibility of tougher lockdown restrictions in the U.K., which instantly overshadowed the optimism over vaccines’ rollout for the highly contagious disease and contributed to the equity market losses. However, the intensifying concerns about rising COVID-19 cases and the intensifying lockdowns could cap further gains in the currency pair.

Daily Technical Levels

Support   Resistance

1.2179     1.2279

1.2144     1.2344

1.2078     1.2379

Pivot Point: 1.2244

EUR/USD– Trading Tip

The EUR/USD is trading with a mixed bias at the 1.2272 level, having violated the upward trendline at the 1.2252 level. At the moment, the pair is likely to face resistance at the 1.2307 level along with a support area of 1.2245 and 1.2215. Bullish bias seems dominant today as the 50 periods EMA supports the pair at 1.2245 level. However, the MACD stays in a sell mode, as histograms are being formed below 0, supporting selling bias. 

GBP/USD – Daily Analysis

During Tuesday’s European trading hours, the GBP/USD currency pair failed to extend its previous session winning streak and took some offer well below the 1.360 level mainly due to the continuous surge in new COVID-19 cases in the U.K., which raised doubts over the U.K. economic recovery and turned out to be one of the key factors that kept the currency pair down. On the contrary, the broad-based U.S. dollar weakness, triggered by multiple factors, failed to support the GBP/USD pair or ease the bearish pressure. At this particular time, the GBP/USD currency pair is currently trading at 1.3556 and consolidating in the range between 1.3556 – 1.3612.

Despite the risk-off market sentiment, the broad-based U.S. dollar failed to gain any positive traction and dropped near multi-year lows amid the probability of an additional U.S. financial aid package and speculations Fed will keep interest rates lower for a longer period. Apart from this, the optimism over a possible coronavirus vaccine pushes investors towards riskier currencies and higher-yielding assets rather than the safe-haven asset, which eventually leads to further losses in the safe-haven U.S. dollar. 

However, the U.S. dollar losses were seen as one of the key factors that benefitted the EUR/USD currency pair. As of now, the U.S. Dollar Index that tracks the greenback against a bucket of other currencies dropped by 0.04% to 89.812 by 8:49 PM ET (1:49 AM GMT).

Apart from Brexit and U.S. headlines, the currency pair came under pressure as the market’s risk sentiment was affected by the increase in the number of coronavirus cases worldwide. 

The rising number of infections from COVID-19 raised fears that countries might extend the restrictions that would have a negative impact on global economic recovery. These fears kept the risk perceived GBP/USD pair under pressure and kept its gains limited during the Asian session on Monday.

Daily Technical Levels

Support   Resistance

1.3623      1.3705

1.3573      1.3737

1.3540      1.3788

Pivot Point: 1.3655

GBP/USD– Trading Tip

The GBP/USD pair has also violated the support level of 1.3609 level extended by an upward channel, which has now been violated. On the higher side, the Sterling may find resistance at 1.3609 and 1.3698 level while support at 1.3533 level today. The Cable is crossing below 50 periods EMA, and the MACD is also forming histograms below 0, suggesting strong selling bias. We should consider taking a selling trade the Cable below 1.3607 level today. 

USD/JPY – Daily Analysis

The USD/JPY continues trading with a bearish bias at the 102.930 level, as it looks clear direction while taking rounds to 103.10/15 through the opening hour of Asian trading sessions. The yen pair descended to the new low in 10 months the prior day before closing with the Doji candlestick’s near opening levels on the daily chart. The risk-aversion stream, supported by concerns of the coronavirus (COVID-19) tension and the unadventurous spirits ahead of the Georgian elections, battles the greenback recovery and holds the USD/JPY in a compact range off-late.

The U.S. Dollar Index that includes the worth of the greenback against the basket of six major currencies was dropping by 0.25% to 89.67 on the day to insignificantly beneath the level it closed 2020 at 89.766. The U.S. dollar instability appended to the downward momentum of the USD/JPY pair. The Federal Reserve is scheduled to publish the minutes from its December conference on Wednesday. Investors will be watching for more detail on the talks about securing their forward policy guidance more specific and the chance of additional development in asset buying in 2021. 

The USD/JPY pair was also down in initial trading hours on Monday as the rising number of coronavirus cases throughout the world raised the safe-haven appeal in the market. Prime Minister Boris Johnson urged that strict lockdown stipulations would be placed in England to fight against the new variant of coronavirus that has pushed the infection rates to their highest record levels. School unions have raised called for the closure of all schools for a couple of weeks as the virus was spreading faster, but Johnson said to parents that they should send children to school as the threats to young kids from the deadly virus were very small.

 From the U.S. side, at 19:45 GMT, the Final Manufacturing PMI from the U.S. for December is projected to come as 56.3 against the previous 56.5 and weigh on the U.S. dollar add in the losses of USD/JPY pair. At 20:00 GMT, the Construction Spending for November is estimated to decrease to 1.1% against the previous 1.3% that could weigh on the U.S. dollar and USD/JPY pair as well.

Daily Technical Levels

Support Resistance

103.02     103.34

102.85     103.49

102.70     103.66

Pivot Point: 103.17

USD/JPY – Trading Tips

The USD/JPY is trading sharply bearish at 102.940, gaining support at the 102.940 level. The USD/JPY pair has formed a downward channel on the two-hourly timeframes, which may extend resistance at 103.300 as at the same level 50 periods EMA is also extending resistance. Today, we need to keep an eye on the 102.940 mark as a violation of this may offer us a sell trade until the 102.598 level. The MACD and RSI are suggesting selling bias in USD/JPY today. Good luck!


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