The European currency ended last week with a completely logical fall. At this time, it can be concluded that the pair resumed the downward trend after it failed to gain a foothold above the Ichimoku cloud. Thus, theoretically, the strengthening of the US currency may continue this week. And this option remains the most likely scenario. However, next week will be quite rich in various fundamental and macroeconomic events. Therefore, the influence of the "foundation" can be quite strong. Based on this, the euro/dollar pair may not move exactly according to the "technique" or with significant additions to this "technique". However, before analyzing the news calendar for the next week, I suggest once again going through the global fundamental factors. The most important thing to remember now is that it is the US dollar that has the necessary fundamental support. The Fed is ready to raise the rate by 2022 and unload its balance sheet to stop the acceleration of inflation and return it to the value of 2%. And this plan to tighten monetary policy may support the US currency for most of this year. However, it should also be remembered about such a concept as "ahead of the curve". In other words, market participants are already familiar with the Fed's plan for 2022. The development of this plan by the market could have begun long before the start of the implementation of this plan. Consequently, it can be fully taken into account in the euro/dollar exchange rate much earlier than the Fed finishes raising the rate. This is just an assumption because no one can say for sure when the market will fully work out those events that have not even begun yet. At the same time, it is simply not necessary to assume that the dollar will now grow throughout 2022 with a 100% probability.
There will be a large number of important events in the European Union next week. The "hit parade" will begin on Monday when the GDP report for the fourth quarter will be published. Recall that in the States, the same indicator increased by 6.9% q/q. Now attention. What is the forecast for GDP for the fourth quarter in the EU? +0.2-0.3% q/q. That is, do you understand how big the difference is at this time between the EU and the US economies? It is not surprising that the ECB does not even think about tightening monetary policy. With such economic growth, it is necessary to continue discussing its stimulation, and not the rejection of incentives and an increase in the rate. However, this is not all that the next week holds in itself. On Tuesday, the index of business activity in the manufacturing sector, as well as the unemployment rate will be published. These are not the strongest indicators, so they are unlikely to interest traders. But on Wednesday, the consumer price index for January will be published and, according to forecasts, inflation is expected to slow down to 4.3%-4.5%. It is difficult to say whether this is good or bad for the euro currency, but the fact that Europe can cope with inflation using the "wait, it will pass by itself" method is a fact. Although the fall in inflation for the euro is probably a negative factor, it further reduces the likelihood of tightening the ECB's monetary policy. The results of the ECB meeting will be announced on Thursday. This is certainly an important event, but it is unlikely that important information will come from it. The parameters of monetary policy will not be changed, so all attention will be paid to the press conference with Christine Lagarde. Here everything will depend on what exactly the ECB head says. On Friday, a report on retail sales will be published, which is also unlikely to interest the markets.
Trading recommendations for the EUR/USD pair:
The technical picture of the EUR/USD pair on the 4-hour chart according to the Ichimoku strategy looks extremely eloquent. Over the past two weeks, the pair has been doing nothing but falling. Therefore, after such a strong fall, it would be nice to adjust at least a little. In principle, there will be enough opportunities for a "purely technical correction" next week. The nearest target is the critical line. As long as the price is below it, the downward trend persists, and the dollar can continue to rise in price for almost any period.
Explanations to the illustrations:
Price levels of support and resistance (resistance /support), Fibonacci levels - target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5).
