Daily Market Analysis by Solid ECN | *Video*

On the daily chart, the third wave of the higher level 3 of (1) develops, within which the first wave of the lower level i of 3 formed, a correction developed as the second wave ii of 3, and the third wave iii of 3 develops. Now, the third wave of the lower level (iii) of iii has formed, a local correction has ended as the wave (iv) of iii, and the fifth wave (v) of iii is developing. If the assumption is correct, the pair will grow to the levels of 118.00?120.60. In this scenario, critical stop loss level is 113.10.

The European currency shows moderate growth against the US dollar during the Asian session, continuing the development of flat dynamics in the short term.

The day before, EUR/USD showed a rather active decline, which was caused by a short-term strengthening of the American currency, which is supported by the expectations of an imminent increase in interest rates by the US Fed. Last week, the regulator released the minutes of its last meeting, which demonstrate "hawkish" rhetoric. Representatives of the department noted the negative effect of the continuing growth in consumer inflation, as well as the still tense situation on the labor market. In 2022, the regulator may increase the rate 3 or more times, and the first adjustment may occur as early as March, subject to the acceleration of the curtailment of the quantitative easing (QE) program.

Monday's macroeconomic statistics from the eurozone provided little support to the euro. Sentix Investor Confidence in January rose from 13.5 to 14.9 points against the forecast of a reduction to 12 points. The Unemployment Rate in the region in November, as expected, decreased from 7.3% to 7.2%.

Bollinger Bands in D1 chart demonstrate flat dynamics. The price range is almost unchanged, but it remains rather spacious for the current level of activity in the market. MACD indicator is growing preserving a weak buy signal (located above the signal line). Stochastic keeps its upward direction but is rapidly approaching its highs, which reflects the risks of overbought EUR in the ultra-short term.

Resistance levels: 1.1363, 1.1400, 1.1422, 1.1460.

Support levels: 1.1329, 1.1300, 1.1255, 1.1220.

The US currency is strengthening against the yen today and has ambiguous dynamics paired with the euro and the pound.

Investors are waiting for today's speech by the head of the US Fed Jerome Powell in front of the Committee on Banking, Housing and Urban Affairs of the US Senate. It is expected that before approving his candidacy for the post of head of the US regulator for a new four-year term, Powell will answer questions from Senators who will be interested in the measures taken by the US Fed to combat high inflation. Thus, Powell can clarify the further steps of the regulator in the field of monetary policy. Currently, it is believed that the beginning of the rate hike may begin as early as March, and not in the summer or at the end of the year, as previously thought. Moreover, Goldman Sachs experts expect four increases at once during the year. In general, Powell's comments can cause a significant market movement.

The European currency is strengthening against the yen today and has ambiguous dynamics paired with the USD and the pound.

In the absence of significant economic releases, the attention of European investors is focused on the comments of representatives of the European Central Bank regarding the high inflationary pressure on the European economy. It should be recalled that in December, the consumer price index in the eurozone countries increased by a record 5.0%. Today, the head of the regulator, Christine Lagarde, said that she understands the concerns of citizens about high prices, and confirmed that they can trust the ECB in solving this problem. According to her, the bank stands for price stability, which is crucial for fixing inflation expectations and confidence in the currency. ECB Chief Economist Philip Lane said the ECB still does not expect inflation to exceed the 2.0% target in the medium term. The new governor of the German Bundesbank, Joachim Nagel, noted that the price increase may continue longer than expected. In general, European officials have not yet specified new ways to combat inflationary pressure.

The British currency is strengthening against the yen today and has ambiguous dynamics paired with the USD and the euro.

December retail sales data from the British Retail Consortium (BRC) was published today. On an annualized basis, sales increased by 0.6%, which is better than market expectations (0.3%), but worse than the November growth of 1.8%. In general, BRC specialists are skeptical. They believe that retail trade will face significant pressure this year, as consumer spending will be restrained by rising inflation, an increase in energy bills and a tax increase coming in April. It should be noted that the British government is trying to mitigate inflationary pressure on the economy. Thus, The Times newspaper reported that the Ministry of Finance of the United Kingdom is considering the possibility of reducing the "green levy", which is levied on electricity consumption, in order to slow down the increase in prices in the energy market.

The Japanese currency is weakening today against its main competitors - the pound, the USD and the euro.

The focus of investors' attention remains the epidemiological situation in the country, which continues to be difficult. Prime Minister Fumio Kishida said today that the government will maintain the current strict restrictions on entry into the country until the end of February, although a number of exceptions may be made for humanitarian reasons. Currently, Japan has one of the strictest border regimes in the world, which prohibits residents from entering the country without Japanese citizenship, including foreign members of Japanese families and people permanently living in Japan. It is believed that this measure slows down the spread of the COVID-19 Omicron strain in the country. It also should be noted that according to the quarterly survey of the Bank of Japan, inflation expectations of Japanese households have risen to a two-year high. 78.8% of respondents expect prices to rise during the year, which gives investors hope that the Japanese regulator will still be able to push the inflation rate to the target level of 2.0%.

The Australian currency is weakening against the euro, the pound and the USD today, but is strengthening against the yen.

Australian economic data released today turned out to be controversial. Retail sales in November accelerated growth from 4.9% to 7.3%, which is higher than the 3.9% expected by investors. However, the positive effect of these data was offset by weak trade statistics. The volume of exports of Australian goods in November increased by 2.0%, and imports into the country increased by 6.0%, which led to a reduction in the trade surplus from 10.781 to 9.423B Australian dollars.

Oil quotes are trying to grow today.

Prices are rising due to the increasing optimism of investors. Market participants believe that the growth in oil demand will be maintained, since the governments of the leading consumer states are abandoning overly strict quarantine measures to curb the coronavirus pandemic caused by the Omicron strain. In addition, prices are supported by the slow increase in oil production by OPEC+ countries, which have not yet chosen their quotas, and interruptions in the supply of "black gold" from Libya. During the day, investors are waiting for the publication of a weekly report on the amount of oil reserves in the USA from API. Last time, the figure fell by 6,432M barrels. The continuation of the trend may give additional support to oil quotes.

On the daily chart, the first wave of the higher level (1) of C developed, and a downward correction forms as the wave (2) of C. Now, wave C of (2) is developing, within which the first wave of the lower level i of C has formed, a local correction has ended as the wave ii of C, and the development of the third wave iii of C has started. If the assumption is correct, the pair will fall to the levels of 0.6742?0.6446. In this scenario, critical stop loss level is 0.7277.

The pair may grow.

On the daily chart, the first wave of the higher level (1) of 3 formed, a downward correction developed as the wave (2) of 3, and the development of the third wave (3) of 3 started. Now, the first wave of the lower level i of 1 of (3) has formed, a local correction has developed as the wave ii of 1, and the formation of the wave iii of 1 has started, within which the development of the wave (iii) of iii has started. If the assumption is correct, the price will grow to the levels of 26.76?28.68. In this scenario, critical stop loss level is 21.91.

Gold prices are consolidating near the psychological support at $1800, developing a weak downtrend since the end of last trading week. Demand for the precious metal is moderately declining as investor activity recovers. Traders ignore the difficult epidemiological situation in the world and focus on the prospects for further tightening of monetary policy by leading financial regulators. First of all, one should expect a rate increase from the US Federal Reserve and the Bank of England, while the European Central Bank is in no hurry to take active steps, waiting for more clear signals from the economy.

The macroeconomic statistics from the US released the day before did not have a noticeable impact on the dynamics of the instrument; however, it attracted attention with a sharp drop in the new york Empire State Manufacturing Index. In January, the indicator fell from 31.9 to -0.7 points, while forecasts suggested a decline to only 25.7 points.

Today, investors are focused on the statistics from the US on the dynamics of the construction market and data from Canada on the Consumer Price Index for December. In turn, statistics on inflation in Germany and the UK will be released in Europe.

In the daily chart, Bollinger Bands are reversing horizontally. The price range is slightly narrowing from above, reflecting the correctional decline in the short term. MACD is declining keeping a weak sell signal. Stochastic shows a more confident decline, but at the moment it is quickly approaching its lows, indicating growing risks of the instrument being oversold in the ultra-short term.

Resistance levels: $1814, $1823, $1831.

Support levels: $1805, $1800, $1790, $1778.32

The Australian dollar, thanks to the active actions of the ?bears?, is losing ground at the end of the current trading week, testing the level of 0.7200 for a breakdown. AUD/USD pair is losing ground and moving into the ?red? zone, despite the fact that there are not many fundamental reasons for the growth of the American currency. The data released the day before from the US failed to support the ?bullish? sentiment of investors in the US currency, neither within the data on Initial Jobless Claims, nor on the statistics of Existing Home Sales.

In turn, on Thursday, the Australian dollar managed to enlist fairly strong support from market participants after the publication of a strong report on the Australian labor market for December. The Employment Change increased by 64.8K jobs, which turned out to be significantly better than market expectations of 30K jobs. At the same time, the Unemployment Rate in the country in December fell to new record lows at around 4.2%, although analysts' forecasts suggested a decline from only 4.6% to 4.5%.

On the daily chart, Bollinger Bands show flat dynamics. The price range remains virtually unchanged, remaining spacious enough for the current level of activity in the market. MACD is stretching into a line along the zero level, signaling an approximate balance of power between sellers and buyers in the short term. Stochastic is trying to reverse upwards, near the level of ?20? and indicating the continuation of the ?bullish? momentum since the middle of the week.

Resistance levels: 0.7250, 0.7300, 0.7328, 0.7369.

Support levels: 0.7200, 0.7160, 0.7128, 0.7100.