Home Forex Forex Market Analysis Daily F.X. Analysis, January 7 – Top Trade Setups In Forex –...

Daily F.X. Analysis, January 7 – Top Trade Setups In Forex – Risk-off Sentiment Dominates! 

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The U.S. Dollar Index dropped 0.3% on the day to 96.62 on Monday, as better-than-expected economic data lifted the euro and the pound.

The euro gained 0.3% to $1.1195. Official data showed that German retails sales grew 2.1% on month in November (+1.0% expected). The eurozone’s Sentix Investor Confidence Index climbed to 7.6 in January (2.6 expected) from 0.7 in December. 

The December Market Services PMI (final reading) was reported at 52.9 for Germany (52.0 expected) and 52.8 for the eurozone (52.4 expected)

Economic Events to Watch Today


 


 EUR/USD – Daily Analysis

The EUR/USD currency pair remains on the bullish track, having hit the bullish mode in the previous two trading days, mainly becasue of upbeat macroeconomic data releases from Germany. As of writing, the currency pair is currently trading at 1.1193 and consolidates in the range between 1.1188 – 1.1198. The currency pair climbed 0.34% on Monday due to the EUR currency, which soared in the wake of upbeat Germany services PMI.

Looking forward, the EUR/USD currency pair will likely hit the five-month high above 1.1239 if the U.S. data shows deceleration or contraction in the coming non-manufacturing activity. However, the pullback from the recent high of 1.1239 has likely expired, and the rally from the November 29 low of 1.0981 has resumed.

Therefore, the currency pair may hit the level of 1.1239 and will likely break higher if the US ISM non-manufacturing data for December, which is scheduled to release at 15:00 GMT, release below the November figures of 53.9, signaling deceleration in the activity. A reading below 50 would imply contraction. By the way, the market is expecting a print of 54.5.

On the other hand, the big beat on expectations will confirm the Federal Reserves’ decision regarding pause in a rate cut, sending the greenback higher across the board.

Looking forward, the EUR/USD currency pair will likely take hints from the Eurozone retail sales data for November, which is scheduled to release at 10:00 GMT. At press time, EUR/USD is trading mostly unchanged on the day at 1.1193.

As of today, the Eurostat will release the inflation report and the Retail Sales figures. Traders expect the core Consumer Price Index to remain stable at 1.3% yearly in December. In the later part, the ISM Non-Manufacturing PMI from the U.S. will be looked upon for fresh direction.

Daily Support and Resistance

  • S3 1.1186
  • S2 1.1189
  • S1 1.1191
  • Pivot Point 1.1193
  • R1 1.1194
  • R2 1.1196
  • R3 1.1199

EUR/USD– Trading Tips

On the 2 hour chart, the EUR/USD has tested the support level of 1.1130, which was being extended by the old triangle pattern. The U.S. Iran war sentiments are making EUR/USD weaker and are very likely to drive bullish bias until 1.1200 and 1.1245 level today. 

Speaking about the leading indicators, the RSI and MACD are holding in the buying zone, demonstrating the bullish trend in the EUR/USD pair today. Consider staying bullish until 1.1240 today.

 


GBP/USD– Daily Analysis

The GBP/USD currency pair still flashing green and continued its recovery rally near 1.3172, mainly due to the high expectations that the United Kingdom Prime Minister Boris Johnson’s Brexit plan will likely be passed in voting on the day. As of writing, the currency pair is currently trading at 1.3171. The currency pair established notable gains yesterday in the wake of greenback weakness and unexpectedly better figures of the U.K. Serves PMI. 

Traders will keep their eyes on the British political news for fresh direction due to a lack of significant data and events on the calendar. On the other hand, the US-Middle East tension still on the fire without any major outcome, while the U.S. data, which is due today, will likely entertain the traders.

The United Kingdom Government will not argue on the Brexit deal anymore. Prime Minister Boris Johnson said they will negotiate a post-Brexit free trade deal with the United States and European Union.

The trader will keep their eyes on Brexit headlines due to a lack of significant data and events in the United Kingdom calendar. On the flip side, the lack of any result regarding the on-going US-Iran war increases the risk in the market, whereas the Sino-US trade headlines are again intensifying. Investors will carefully observe the Us data and political news for the fresh direction.

At the data front, the U.S. data calendar is worth watching, with the highlight of the non-manufacturing ISM survey for Dec. The consensus is for improvement from 53.9 in Nov to 54.5, with further interest in the employment sub-index for guidance on Friday’s non-farm payrolls data. 

    

Daily Support and Resistance

  • S3 1.2914
  • S2 1.3025
  • S1 1.3097
  • Pivot Point 1.3137
  • R1 1.3209
  • R2 1.3248
  • R3 1.3359

GBP/USD– Trading Tip

The GBP/USD is also trading bullish around 1.3185 due to weakness in the U.S. dollar. The recent bullish engulfing candle is suggesting odds of bullish trend continuation in the GBP/USD pair. 

On the higher side, the GBP/USD may find resistance near 1.3185 level today while the support still stays at 1.3060. A bullish breakout of 1.3185 level can extend the bullish trend until 1.3285. Let’s stay bullish above 1.3125 today. 


USD/JPY – Daily Analysis

The USD/JPY currency pair is looking flat and consolidating in the narrow range between the 108.32 and 108.44, mainly due to the lack of any key scheduled data. As of writing, the currency pair is currently trading at 108.41. However, the Japanese yen has been weak overnight. The USD/JPY currency pair hit the level of 108.45 from the 107.80 despite the United States and Iran threat.

The Europan nations also requested for peace and de-escalation of the current situation between the Us-Iran. Iran said that the United States need to worry regarding the retaliation, war is not on their agenda, and nor is it on the USA’s. In this regard, the U.S. stocks market continues to survive higher closes recovering from an initial risk-off plunge.

Eventually, the U.S. two-year Treasury yields rose from 1.51% to 1.56% the high, whereas the ten-year yields from 1.76% to 1.80%. Of course, the greenback is usually favored at times of war as well. 

It should be noted that the markets are pricing no change at the next Federal Reserve meeting on January 29 but a terminal rate of 1.26% (vs. Fed’s mid-rate at 1.63% currently).

On the other hand, the risk recovered after the comment came from the United States Defense Secretary Esper that the U.S. troops are not planning on pulling out of Iraq and that America would not target Iranian cultural sites if further hostilities break out.

At the USD front, the U.S. Dollar traded broadly bearish that hold the EUR/USD and GBP/USD currency pair bullish, whereas the Japanese Yen lost ground due to recovery found in the Asian equities and Treasury yields.

Daily Support and Resistance

  • S3 107.11
  • S2 107.69
  • S1 108.03
  • Pivot Point 108.27
  • R1 108.61
  • R2 108.85
  • R3 109.43

USD/JPY – Trading Tips

The USD/JPY is trading in a bearish channel, which is keeping it support near 107.750 for now. At the same time, the resistance is likely to be found around 108.250. The RSI and MACD are staying above 50 and 0, suggesting a bullish trend in the USD/JPY.

In the larger view, USD/JPY is staying in the long term descending channel that began at 118.65 (Dec. 2016). Recovery from 104.45 also disappointed to support above 55 weeks EMA (presently at 109.02). The overall forecast prevails bearish and falls from 118.65 is in favor of extending through 104.45 low. Technically the pair has the potential to drop further until 107.800 level, and violation of this could continue selling until 107.600. 

All the best!

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