Daily F.X. Analysis, January 20 – Top Trade Setups In Forex – Economic Sentiment Under Spotlight!

On the news front, the eyes will remain on the U.K. Monetary Policy reports due during the late European hours. BOE isn’t expected to change the rates, and it may keep them at 0.10%; however, it will be important to see MPC Official Bank Rate Votes. Besides, the European Final CPI data will remain in focus today.

Economic Events to Watch Today  

 

---

EUR/USD – Daily Analysis

Today in the Asian trading session, the EUR/USD currency pair extended its previous-day bullish streak and refreshed daily tops around the 1.2150 regions. However, the prevalent bullish bias around the currency pair was mainly tied to the weaker U.S. dollar. The prevalent upbeat market mood was seen as one of the key factors undermining the safe-haven U.S. dollar. However, the global risk sentiment was being supported by the increasing prospects of massive fiscal spending in the U.S. Across the pond, the buying interest around the currency pair got an additional boost from the better-than-expected German ZEW Economic Sentiment Index. On the bearish side, the escalating concerns over the COVID-19 cases and economically-painful extended lockdown restrictions keep questioning the currency pair’s upside momentum. As of writing, the EUR/USD currency pair is currently trading at 1.2153 and consolidating in the range between 1.2124 – 1.2158.

The market trading sentiment managed to extend its previous-day positive performance and remained supportive during the Asian trading session on the day. However, the reason could be tied to the higher prospects of massive fiscal spending in the U.S. As per the latest report, the Secretary of the Treasury nominee Janet Yellen recently pushed Congress to “act big” on COVID- 19 relief and not worry too much about debt during her Senate confirmation hearing before the Senate Finance Committee. These positive comments helped the market trading sentiment to stay bid. The latest upticks in the equity market could also be attributed to the low number of negatives factors from the economic calendar. The prevalent upbeat market mood was seen as one of the key factors that undermining the safe-haven greenback.

Across the pond, the buying interest around the currency pair got an additional boost from the better-than-expected German ZEW Economic Sentiment Index. At the data front, the German ZEW Economic Sentiment Index climbed to 61.8 in January compared to 60.0 expected and 55.0 previous. Meanwhile, the gauge for the broader Eurozone surprisingly improved to 58.3 during the reported month against 45.5 forecasted.

On the bearish side, the concerns about rising COVID-19 cases and economically-painful hard lockdowns keep challenging the pair’s upside momentum. As per the latest report, the death toll from the coronavirus in the U.S. crossed to 401,000, and the number of cases in the country exceeded 24 million as of January 20. In addition to this, the World Health Organization (WHO) said that the U.K. coronavirus strain had been detected in at least 60 countries so far. The Kingdom reported 33,355 new virus cases and 1,610 deaths on the day. Globally, the number of cases has topped 96 million. Also questioning the pair’s upside momentum could be the reports of likely shortage of vaccine in New York and postponement of Pfizer’s vaccine to Canada.


Daily Technical Levels

Support   Resistance

1.2006     1.2091

1.2039     1.2106

1.2058     1.2139

Pivot Point: 1.2072

EUR/USD– Trading Tip

The EUR/USD is trading with a bullish bias at 1.2145 level. The pair has recently crossed over 50 periods of EMA on the hourly timeframe, suggesting chances of an upward movement in the market. Continuation of a bullish trend can lead the EUR/USD price towards the 1.2178 level. At the same time, support continues to hold around 1.2150 today. The bullish bias is likely to dominate the market.

GBP/USD – Daily Analysis

Today in the early European trading session, the GBP/USD currency pair maintained its bid tone through the first half of the Asian session and hit the weekly highs around above the mid-1.3600 level amid a softer tone surrounding the U.S. dollar. The market hopes for additional U.S. fiscal stimulus instantly escalated after the U.S. Treasury Secretary nominee Janet Yellen pushed lawmakers to act big on the COVID-19 relief package and not worry too much about debt, which in turn, was seen as one of the key factors that weakened the safe-haven U.S. dollar and contributed to the currency pair gains. Apart from this, the greenback losses were further bolstered by the optimism over the rollout of COVID-19 vaccines, which lend some additional support to the currency pair. Across the ocean, the buying interest around the cable currency pair picked up further pace following the release of hotter-than-expected U.K. consumer inflation figures. 

On the contrary, the concerns about the highly contagious coronavirus disease and the imposition of fresh travel restrictions in the U.K. could cap the GBP/USD currency pair’s upside momentum. At a particular time, the GBP/USD currency pair is currently trading at 1.3668 and consolidating in the range between 1.3627 – 1.3675.

The combination of positive factors has helped the GBP/USD currency pair catch sharp, fresh bids on the day. Be its optimism over the rollout of vaccines for the highly infectious coronavirus disease or the rising prospects of massive fiscal spending in the U.S., not the forget upbeat economics data, these all factors positively impact the market trading sentiment. 

Across the ocean, the buying interest around the cable currency pair picked up further pace following the release of hotter-than-expected U.K. consumer inflation figures. The headline CPI increased more-than-expected at the data front and arrived at a 0.6% YoY rate in December. Meanwhile, the core CPI (excluding food and energy items) also exceeded consensus estimations.

Alternatively, the concerns about rising COVID-19 cases and economically-painful hard lockdowns in the U.K. keep challenging the pair’s upside momentum. As per the latest report from World Health Organization (WHO), the U.K. coronavirus strain has been detected in at least 60 countries so far. The Kingdom reported 33,355 new virus cases and 1,610 deaths on the day. Globally, the number of cases has topped 96 million. Also questioning the pair’s upside momentum could be the reports of likely shortage of vaccine in New York and postponement of Pfizer’s vaccine to Canada.


Daily Technical Levels

Support   Resistance

1.3555      1.3722

1.3445      1.3781

1.3387      1.3890

Pivot Point: 1.3613

GBP/USD– Trading Tip

The GBP/USD is also heading north amid a weaker dollar, as it trades at a 1.3655 level. Continuation of an upward trend can lead the Cable towards the next target area of 1.3700 level. At the same time, the Cable may find support at 1.3628 level today.

---

USD/JPY – Daily Analysis

During Wednesday’s early European trading session, the USD/JPY currency pair failed to stop its previous-session bearish bias and came under some renewed selling pressure low around 103.13 level mainly due to the broad-based U.S. dollar weakness. The market hopes for additional U.S. fiscal stimulus increased after the U.S. Treasury Secretary nominee Janet Yellen advised lawmakers to act big on the COVID-19 relief package while stating that the benefits of increased spending are greater than the costs associated with a higher debt burden, which in turn, boosted the market trading sentiment and weakened the safe-haven U.S. dollar. 

Apart from this, the greenback losses were further bolstered by the cautious sentiment ahead of President-elect Joe Biden’s inaugural ceremony on the day. On the different page, the upbeat market sentiment weakened the safe-haven Japanese yen, which, in turn, was seen as one of the leading factors that helped the USD/JPY currency pair to limit its deeper losses. Currently, the USD/CHF currency pair is currently trading at 103.77 and consolidating in the range between 103.72 – 103.94.

The market trading sentiment was representing positive performance on the day as the bullish appearance of Asia-Pacific stocks and upticks of the S&P 500 Futures tend to highlight the risk-on mood supported by optimism over a potential vaccine/treatment for the highly infectious coronavirus. Besides this, the increasing prospects of massive fiscal spending in the U.S. also played its major role in underpinning the market trading sentiment. The market hopes for additional U.S. fiscal stimulus increased further after the U.S. Treasury Secretary nominee Janet Yellen’s confirmation hearing before the Senate Finance Committee on Tuesday. 

As in result, the broad-based U.S. failed to gain any bid and remained pessimistic on the day. Apart from this, the losses in the U.S. dollar were further sparked by the optimism over the rollout of vaccines for the highly contagious coronavirus disease. In addition to this, the cautious sentiment ahead of President-elect Joe Biden’s inaugural ceremony also exerted downside pressure on the greenback. Hence, the losses in the U.S. dollar becomes the key factor that kept the currency pair lower. Meanwhile, the U.S. Dollar Index that tracks the greenback against a bucket of other currencies dropped by 0.11% to 90.365 by 9:17 PM ET (2:17 AM GMT)—moving on, the intensifying hopes for more aggressive U.S. fiscal spending under Biden’s presidency continuously providing support to the U.S. Treasury bond yields, which could help the U.S. dollar to limit any meaningful downside.

Conversely, the positive performance around the equity market was slightly unaffected by the concerns about rising COVID-19 deaths and the re-imposing of the economically-painful hard lockdowns, which keep fueling the worries over the global economic recovery. As per the latest report, the death cases from the COVID in the U.S. crossed to 401,000, and the number of cases in the country exceeded 24 million as of January 20. In addition to this, the World Health Organization (WHO) said that the U.K. coronavirus strain had been detected in at least 60 countries so far. The Kingdom reported 33,355 new virus cases and 1,610 deaths on the day. Globally, the number of cases has topped 96 million. Also questioning the pair’s upside momentum could be the reports of likely shortage of vaccine in New York and postponement of Pfizer’s vaccine to Canada.


Daily Technical Levels

Support   Resistance

103.53     104.16

103.31     104.56

102.91     104.78

Pivot Point: 103.94

USD/JPY – Trading Tips

The USD/JPY continues to trade sideways in between a wide trading range of 104.340 – 103.560. The USD/JPY has formed a sideways channel on the 4-hour timeframe, and it has the chance of leading the pair towards the next resistance level of 104.800 upon the breakout of 104.810. The 50 periods EMA supports the bullish trend, and we may have odds of taking a buying trade over the 103.570 level today. Good luck!