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EURUSD: eurobulls muster turnaround

The EURUSD pair closed higher on Tuesday, January 20, rising 0.45% to 1.2129. The price action started trending upward right from the opening of Asian trading and continued its ascent until the close of the European session.

Positive sentiment tapped into hopes for additional measures aimed at jump-starting the US economy. And while Janet Yellen's speech did not exert a noticeable impact on the markets, the dollar still failed to stage a reversal.

Yellen addressed the Senate confirmation hearing as the incoming US Treasury Secretary. She called for a package of significant financial and budgetary measures to rescue the economy after the pandemic-induced recession. Yellen also stated that intentional targeting of exchange rates to gain commercial advantage is unacceptable. The exchange rate of the dollar and other currencies should be determined by the market.

Todays macro agenda (GMT+3)

  • 13:00 Eurozone: CPI (December)
  • 16:30 Canada: CPI (December)
  • 18:00 Canada: BoC rate decision, accompanying statement; US: NAHB housing market index (January)

Current outlook

Buyers pushed the key pair up to 1.2158 after breaking out of the trendline (1.2108) and the 45-degree angle, offsetting by 80% the decline from 1.2179 to 1.2054. The 1.2145 reference rate was breached (the upper line of the channel, which hinges on three values: L1.2132, L1.2054 and H1.2223). The road to 1.2180 was opened for buyers to completely offset the decline and form a V-pattern. As long as the price action holds below 1.2179, the bearish trend for the euro remains on the hourly chart.

Today market participants will zero in on the inauguration of Joe Biden, who is scheduled to be sworn in as US president at 17:00 GMT. As for the key data point, we advise focusing on the Eurozone inflation report.

All major currencies are trading in positive territory. Topping the leader board are the aussie (+0.25%) and the kiwi (+0.36%). The picture looks mixed in euro crosses. EURGBP is trading slightly to the downside around the trendline from 0.8866. Since the euro is under pressure from cross trading, sterling is rising at a faster pace than the euro against the dollar.

Market players now assume that EURGBP will sink to 0.8875. In the event that downward pressure on the DXY persists in Europe, if the cross falls, then the euro will pull back and sterling will move higher. Should that scenario materialize, buyers will buy back the euro and upside will continue to 1.2180. For sellers to regain control, they will need to push the price action down below the 1.2130 mark before the North American session opens.

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