As it was repeatedly noted earlier, the main event of yesterday and the entire trading week was the decision of the US Federal Reserve System (FRS) on interest rates, the accompanying statement to this decision, and the press conference of Fed Chairman Jerome Powell. Economists' forecasts and market participants' expectations that the Federal Reserve will keep the key interest rate in the range of 0.00%-0.25% were fully justified. This is exactly the decision that was made, and it was unanimously voted for by all 11 members of the Open Market Committee (FOMC). Accordingly, the main attention of investors was focused on the details of the accompanying statement and the press conference of the head of the Federal Reserve. From the accompanying statement, we learned that the US Central Bank has maintained the volume of the bond purchase program for $ 120 billion per month. And this factor was also taken into account by the markets. As for the pace of recovery of the world's largest economy, which is still the American one, they are taking place at a moderate pace. At the same time, as indicated in previous statements by the US regulator, further economic activity will depend on the situation with the COVID-19 pandemic. Regarding the inflationary pressure, the bank believes that it is restrained by weak demand for petroleum products. In general, the accompanying FOMC statement did not provide any new information for market participants, which is quite reasonable in the current difficult epidemiological situation in the United States and the world.
In his speech, Fed Chairman Jerome Powell also refrained from making any harsh and radical statements. So, the head of the Federal Reserve said that the policy pursued by his department provides significant support to the US economy, inflation remains below the target level of 2%, and employment in the country is still far from the goals set by the US Central Bank. However, Powell noted that the United States economy, contrary to expectations, has shown greater resilience. Powell also hopes that large-scale vaccination of the population will negate the spread of coronavirus infection. In general, as they say, there is still something to work on, and first of all, it is the achievement of inflation and employment at the levels that the Fed has set.
However, in Europe, there are other problems and they are primarily related to vaccination. The world's leading pharmaceutical companies, such as Pfizer, do not fully comply with their agreements and disrupt the supply of the vaccine, in the volumes that were agreed with several European countries. Meanwhile, Europe is sinking deeper into quarantine. Quarantine restrictions in several countries are being extended and further tightened. Naturally, this causes irreparable damage to the eurozone economy and reduces the attractiveness of the single European currency.
Daily
As expected, yesterday's trading was quite volatile. The daily chart clearly shows that after a strong fall to 1.2058, the main currency pair EUR/USD managed to reduce a significant part of the losses and ended the session on January 27 at the level of 1.2109. Support in the area of 1.2050/60 once again proved to be very strong and did not allow the quote to fall below. However, yesterday's trading closed slightly below the 50 simple moving average and the red line of the Tenkan Ichimoku indicator. Of course, this is a bearish signal for a further decline in the quote, which is observed at the end of this article. Now the disposition of the parties is as follows. The bulls need to prevent the closing of today's trading within the Ichimoku indicator cloud. The bears' task is the opposite.
H4
In the current situation, it is very difficult to determine the positioning. On the one hand, the last candlesticks with long lower shadows indicate a likely rise in the exchange rate, however, the moving averages located in the price zone of 1.2130-1.2152 may limit the expected rise and return the pair to a downward movement.
Trading recommendations for EUR/USD:
In this situation, I think it is advisable to consider both positioning options, while I will give preference to sales that are better planned from the zone highlighted above, as well as on the approach to a strong resistance area of 1.2175-1.2190. In both cases, the confirmation for opening short positions will be the characteristic candlestick signals on this or hourly timeframes. Purchases, in my personal opinion, seem riskier and should be considered only as an adjustment to the price zones indicated above. As noted earlier, the bullish sentiment for the euro/dollar will become significantly stronger only after a true breakdown of the strong technical level of 1.2200, with a mandatory consolidation above. And at the moment, the situation seems to be exactly like this.
