On Friday, the EUR/USD pair extended gains despite an empty macroeconomic calendar. Nevertheless, jitters were still felt in the market, resulting in a weaker dollar against the pound. The fact that the US inflation rate has started to slow down faster means the Federal Reserve may reduce the pace of tightening. Nevertheless, fundamentally, the situation has not changed. The interest rate is now seen at 5%, meaning there should be a 0.5% increase in December and two 0.25% hikes in early 2023. That is, it is likely to be just the reduction that Powell and the FOMC members spoke about last week. One successful inflation report will hardly make the Federal Reserve change its stance. Since the interest rate will reach 5% anyway, it turns out that the inflation report has had no importance. Moreover, it remains to be seen whether inflation will keep falling every month from now on. It may well be that we will see a modest decrease in the figures or non at all next month.
Technically, the pair has room to grow although a week ago, it seemed unlikely that the uptrend would continue. In the H4 time frame, the quote is above the moving average, with the lower linear regression channel heading up and the upper one reversing to the upside. In the H24 time frame, the price broke through the Ichimoku cloud. These technical factors indicate the continuation of the uptrend. It remains to be seen whether fundamental or geopolitical factors will not spoil the picture, as they are the main reason behind the fall in risk assets in 2022.
Democrats keep Senate majority
Last week, the midterm election was held in the United States. Various reliable media sources report that Democrats will keep the Senate, as control of the House of Representatives remains undecided.
Yesterday, it became known that Democrats would keep the key 50 seats in Senate. If seats were equally divided, it would be the vice president to cast the decisive vote.
To win in the US House of Representatives, one of the parties must reach 218 seats. As of Sunday, 211 Republicans won House seats and Democrats won 204 seats. Even if Democrats do not win control of the lower house, they will still be able to block any decisions and proposals of Republicans in the Senate. Therefore, one thing is clear for now: the power situation in the United States has not changed, which means that Republicans have lost the midterm election again.
On November 14th, the 5-day average volatility of EUR/USD totals 168 pips and is evaluated as high. On Monday, the pair is expected to move in the range between 1.0186 and 1.0521. Heiken Ashi's downward reversal will mark the beginning of a bearish correction.
Closest support levels:
S1 – 1.0254
S2 – 1.0132
S3 – 1.0010
Closest resistance levels:
R1 – 1.0376
R2 – 1.0498
R3 – 1.0620
Outlook:
The EUR/USD pair keeps moving north. So, long positions could be held with targets at 1.0498 and 1.0521 until Heiken Ashi reverses to the downside. Short positions could be considered after consolidation below the moving average with targets at 1.0010 and 0.9888.
Indicators on charts:
Linear Regression Channels help identify the current trend. If both channels move in the same direction, a trend is strong.
Moving Average (20-day, smoothed) defines the short-term and current trends.
Murray levels are target levels for trends and corrections.
Volatility levels (red lines) reflect a possible price channel the pair is likely to trade in within the day based on the current volatility indicators.
CCI indicator. When the indicator is in the oversold zone (below 250) or in the overbought area (above 250), it means that a trend reversal is likely to occur soon.
