Daily F.X. Analysis, January 06 – Top Trade Setups In Forex – ADP Non-Farm Employment Change Ahead! 

On the news front, eyes will remain on the Services PMI figures from the Eurozone, U.K., and the United States. Almost all economic figures are expected to perform better than previous months, perhaps due to a lockdown lift. Price action will depend upon any surprise changes in the PMI figures. Later today, the U.S. ADP figures will also drive some volatility in the market.

Economic Events to Watch Today  

---

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.22984 after placing a high of 1.23055 and a low of 1.22419. The renewed U.S. dollar weakness and the prospects for a Democratic majority in the Senate after the runoff election in Georgia boosted the market sentiment that supported the upward trend in EUR/USD pair on Tuesday.

The U.S. Dollar Index that gauges the greenback’s value against the basket of six major currencies fell by almost 0.38% on Tuesday to an 89.53 level that ultimately added gains in EUR/USD pair. The U.S. Dollar was also under stress on Tuesday amid the US Georgia runoff elections that would decide the future of the U.S. Senate. The outcome will be crucial for incoming president Joe Biden as the Senate majority helps pass the law and confirm the cabinet appointments. The result is expected on Wednesday. It has made investors cautious about placing any strong bids in favor of the U.S. dollar, resulting in the upward momentum of EUR/USD.

On the data front, at 12:00 GMT, the German Retail Sales for November raised to 1.9% against the expected -2.0% and supported the single currency Euro and added further gains in EUR/USD pair. At 13:00 GMT, the Spanish Unemployment Change in December raised to 36.8K against the expected 30.5K and weighed on the single currency Euro that capped further EUR/USD pair gains. At 13:55 GMT, the German Unemployment Change for December declined to-37K against the expected 10K and supported the single currency Euro that added further EUR/USD pair gains. At 14:00 GMT, the M3 Money Supply for the year from Eurozone raised to 11.0% against the forecasted 10.6% and supported the single currency Euro that added additional EUR/USD pair gains. The Private Loans for the year from Eurozone dropped to 3.1% from the expected 3.3% and weighed on Euro that further capped gains in EUR/USD pair.

From the U.S. side, at 20:00 GMT, the ISM Manufacturing PMI from December rose to 60.7 against the estimated 56.6 and supported the U.S. dollar, and capped further gains in EUR/USD pair. The ISM Manufacturing Prices also raised to 77.6 against the anticipated 66.0 and supported the U.S. dollar. The Wards Total Vehicle Sales raised to 16.3M against the estimated 15.8M and supported the U.S. dollar, ultimately limiting further gains in EUR/USD pair.

On Wednesday, the HIS Markit will release the Services PMI data for Germany and the Euro area. From the U.S., the ADP Employment Change will also be featured in the economic docket that will impact EUR/USD prices. Furthermore, the investors will keep a close eye on the Georgia election results.

Daily Technical Levels

Support   Resistance

1.2257      1.2318

1.2220      1.2344

1.2195      1.2380

Pivot point: 1.2282

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, so a bullish breakout of 1.2307 can extend buying until the next resistance level of 1.2345.

---

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.36278 after a high of 1.36420 and a low of 1.35540. Despite the third nationwide lockdown in the U.K., the GBP/USD pair raised on Tuesday amid the broad-based U.S. dollar weakness. The U.S. Dollar Index that measures the value of the U.S. dollar against the basket of six major currencies fell by 0.38% towards the two years, the lowest level of 89.53, and weighed on the greenback that ultimately supported the gains in GBP/USD pair.

The U.S. dollar was weak across the board despite the safe-haven appeal in the market mainly because of the Georgia runoff elections in the U.S. The runoff will decide the future of the U.S. Senate. It will be essential for Joe Biden, the upcoming Democratic president of the U.S., as it holds major importance in the U.S. Congress being its upper chamber. Senate holding party could easily approve its bills, which is the main attractiveness for getting majority votes in the Georgia runoff elections. Since 2014, the Senate has been controlled by the Republican Party, and if Democrats win on Wednesday, the extra two seats will give them effective control.

On the other hand, the British Pound was under pressure on Tuesday as the number of new daily confirmed cases of coronavirus in the U.K. has topped 60,000 for the first time since the pandemic started.

According to the government figures on Tuesday, the number of people who tested positive was 60,916. It came in as England and Scotland announced new strict lockdowns with people told to stay at home. The country is entering another nationwide lockdown to control coronavirus’s new variant affected the local currency and GBP/USD pair. However, investors did not give much attention to it and continued moving with the weakness of the U.S. dollar that ultimately pushed the GBP/USD pair higher.

There was no macroeconomic data on the data front to be released from the U.K. From the U.S. side, at 20:00 GMT, the ISM Manufacturing PMI from December surged to 60.7 against the anticipated 56.6 and supported the U.S. dollar and capped further gains in GBP/USD pair. The ISM Manufacturing Prices also rose to 77.6 against the projected 66.0 and supported the U.S. dollar. The Wards Total Vehicle Sales surged to 16.3M against the expected 15.8M and supported the U.S. dollar that ultimately limited further GBP/USD pair gains.

Daily Technical Levels

Support   Resistance

1.3572      1.3660

1.3518      1.3696

1.3483      1.3749

Pivot point: 1.3607

GBP/USD– Trading Tip

The Cable’s technical side also remains mostly unchanged as the GBP/USD pair consolidates between 1.3632 – 1.3556 after violating the support level of 1.3609 level. On the higher side, the Sterling may find resistance at 1.3632 and 1.3697 level while support at 1.3550 and 1.3473 level. Choppy trading expected. 

---

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 102.716 after placing a high of 103.189 and a low of 102.603. On Tuesday, the currency pair USD/JPY came under resumed bearish pressure through the American trading hours and reached its lowest level in nearly ten months at 102.60. The intensified selling pressure surrounding the U.S. dollar in the second half of the day forced the USD/JPY pair on the lower side. The U.S. Dollar Index that measures the value of the greenback against the basket of six major currencies fell to its multi-year lowest level at 89.44 by 0.47% on Tuesday and weighed heavily on the USD/JPY pair.

The U.S. Dollar was also weak across the board ahead of the results of the Georgia runoff elections. The state of Georgia held runoff elections for its two Senate seats. The results will determine who gets to control the U.S. Senate for the next two years and will consequently have a profound impact on the course of U.S. fiscal policy. The U.S. Republican Party has been controlling the U.S. Senate since 2014, and markets are betting that the Republicans will still win at least one of the seats and cement its hold on the upper chamber of the U.S. Congress.

On the data front, at 04:50 GMT, the Monetary Base for the year from Japan raised to 18.3% against the forecasted 18.0% and supported the Japanese Yen that ultimately weighed on the USD/JPY pair. From the U.S. side, at 20:00 GMT, the ISM Manufacturing PMI from December rose to 60.7 against the forecasted 56.6 and supported the U.S. dollar, and capped further losses in the USD/JPY pair. The ISM Manufacturing Prices also raised to 77.6 against the projected 66.0 and supported the U.S. dollar that limited further losses in the USD/JPY pair. The Wards Total Vehicle Sales raised to 16.3M against the estimated 15.8M and supported the U.S. dollar that ultimately limited further losses in the USD/JPY pair.

Meanwhile, the rising demand for safe-haven appeal in the market also supported the safe-haven Japanese Yen that ultimately weighed on the USD/JPY pair. The U.K. entered into a third nationwide lockdown on Monday as the daily count of new coronavirus cases surpassed 60,000 figure for the first time since the pandemic started. The PM Boris Johnson said that it was crucial to control the spread of a new variant of coronavirus that was more contagious.

Meanwhile, Germany also stretched its nationwide lockdown until the end of the month and announced tougher new restrictions to curb rising cases of coronavirus infections. New York on Monday reported its first case of a new variant of the coronavirus that has been reported in more than 30 countries so far. In the past four days, the U.S. has added about 1 million new coronavirus cases that have pushed the total number of cases beyond 21 million. This rising number of cases across the globe added fears for the recovery of the global economy and increased the appeal for safe-haven that ultimately supported the safe-haven Japanese Yen and added weight on the USD/JPY pair on Tuesday.

Daily Technical Levels

Support   Resistance

102.49      103.08

102.24      103.44

101.89      103.68

Pivot point: 102.84

USD/JPY – Trading Tips

The technical side of the USD/JPY also remains mostly unchanged as the USD/JPY is trading sharply bearish at 102.74. On the downside, the USD/JPY pair may find support at the 102.595 level along with resistance at 102.930. The USD/JPY pair has formed a downward channel on the two-hourly timeframes, which is likely to keep the pair bearish. The MACD and 50 EMA is suggesting selling bias in the USD/JPY. Let’s consider taking sell trades below the 102.850 level today. Good luck!