The EUR/USD pair was falling on Monday. It should be noted that business activity indexes in the manufacturing and service sectors decreased noticeably in January. However, it should be noted that Manufacturing Purchasing Managers' Index and Services Purchasing Managers' Index fell in January by 2.7 points and 6.7 points respectively. Thus, the reversal in favour of the European currency in the second half of the day was caused by these reports. However, tonight, the pair made a new reversal in favour of the US currency and resumed the downward trend towards 1.1250. I would also like to mention the pair's two pullbacks from the retracement level of 161.8%, 1.1357, which, in my view, increases the possibility of further declines. Meanwhile, IMF Managing Director Kristalina Georgieva said that interest rate hikes by the Federal Reserve could "throw cold water" on already weak economic recoveries in certain countries. In today's world, almost all economies are linked, so a tightening of monetary policy in the US could affect other emerging economies.
Georgieva also noted that an increase in US rates could have significant implications for countries with higher levels of dollar-dominated debt. It calls on such countries to restructure their debts or extend their repayment periods. Georgieva added that her biggest concern was for low income countries with high levels of this debt. Such countries have doubled in number in the last 6 years. She also noted that 2022 could be even more challenging than 2020. Whereas two years ago the whole world was struggling with slow economic growth and low inflation, now conditions in countries are very different, so we cannot anymore have the same policy everywhere. The IMF chief's words are confirmed by the fact that the ECB is not going to raise interest rates in 2022, while the Fed might do it 3 to 6 times.
On the 4-hour chart, the pair has consolidated below the retracement level of 127.2%, 1.1404, so it keeps the chances of further decline towards the retracement level of 161.8%, 1.1148. The bullish divergence of the CCI indicator allowed the pair to grow a bit, but the fall of quotations has already resumed. In my opinion, this week the decline will continue, unless the Fed springs a mine on traders.
Economic calendar for US and EU
US - Consumer Confidence Index (15-00 UTC).
There is only one event on the EU and US economic calendars for January 25. The US consumer confidence index is far from the most important report, so I believe that the information background today will not have any impact on the traders' sentiment.
Outlook for EUR/USD and trading tips
I recommended to sell the pair if a clear close below the trend line on the hourly chart with a target of 1.1357 is performed. Now these trades can be kept open with a target of 1.1250, as there were two pullbacks from the level of 1.1357. I recommend to buy the pair if there is a rebound from 1.1250 on the hourly chart.
