Current trend

During the Asian session, the EUR/USD pair develops yesterday’s poor corrective impulse, trading at 1.0894.

The negative dynamics are developing against an increase in the consumer price index in the EU in December by 0.2% after a decline of 0.6% earlier, which caused a correction from 2.4% to 2.9% YoY. The core figure strengthened by 0.5%, beating preliminary estimates of 0.4%, and fell from 3.6% to 3.4% YoY. Increasing inflation could signal the European Central Bank (ECB) to move to a more cautious monetary policy. The head of the regulator, Christine Lagarde, speaking at the economic forum in Davos, noted that officials are considering various scenarios for launching such a program but are still facing significant uncertainty. In her opinion, a reduction in the interest rate is possible in the summer of 2024.

The American dollar is moving in a positive trend at 103.200 in USDX on the back of positive macroeconomic statistics: December core retail sales index excluding auto sales rose from 0.2% to 0.4% versus forecasts of 0.2%, and their volume – from 0.3% to 0.6%, beating expectations of 0.4%. The positive dynamics of indicators in December-January was expected, given the holiday sales, however, it supports the national currency.

Support and resistance

On the daily chart, the trading instrument is correcting within a narrow ascending channel with dynamic boundaries of 1.1100–1.0860.

Technical indicators gave a sell signal: fast EMA on the Alligator indicator crossed the signal line downwards, and the AO histogram is forming corrective bars, going down in the sales zone.

Resistance levels: 1.0930, 1.1058.

Support levels: 1.0870, 1.0760.

Trading tips

Short positions may be opened after the price declines and consolidates below 1.0870 with the target at 1.0760. Stop loss is around 1.0920. Implementation period: 7 days or more.

Long positions may be opened after the price rises and consolidates above 1.0930 with the target around 1.1058. Stop loss – 1.0870.