By Gabriel Ojimadu, Alpari
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On Tuesday the 23rd of January, trading on the euro/dollar pair closed up. The end of the US government shutdown wasn’t enough to take the dollar back into positive territory. The greenback came under pressure during the US session after a drop in US bond yields.
Experts believe that the dollar’s decline is down to President Trump’s decision to introduce a 30% import duty on Chinese products. Additionally, the euro was bolstered by the high value of the ZEW index in Germany.
The euro rose to 1.2306 on the back of these events, but buyers were unable to push any higher. They went on the attack once again this morning in Asia to push the rate up to 1.2335.
Day’s news (GMT+3):
Fig 1. EURUSD hourly chart. Source: TradingView
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After the euro dropped to 1.2223, traders started shorting the dollar once again. In the Asian session, buyers shifted the 1.2323 high (17/01/18) to 1.2335 (23/01/18). The dollar declined across the board.
Taking into account the mixed dynamics of the euro crosses, a reversal should be forthcoming having reached the 1.2335 mark. Buyers are treading lightly ahead of tomorrow’s ECB meeting and the subsequent press conference with Mario Draghi.
Market participants aren’t expecting any changes to monetary policy. They will be more interested in Draghi’s speech and the Q&A session with journalists to follow. Traders will be looking at his answers for hints of curtailing the QE program. However, I believe that he will say that interest rates are set to remain low for the long term and that the curtailing of the QE program will be a gradual process.
I didn’t make a forecast on Tuesday and I’m not doing one today as the situation is ambiguous to me and scenarios for a decline aren’t working out due to fundamental factors. My short positions from the 18th of January have closed with a loss. I’ve highlighted some key levels on the chart. Personally, I’m taking a wait-and-see position for the time being.