EUR/USD Overview. Weekly Preview. Holidays Begin

[Ben Graham]

The EUR/USD currency pair "stagnated" on Friday. The volatility of movements once again did not please traders. Essentially, there was no significant movement. It should be noted that a large volume of important macroeconomic data was published in the Eurozone and the U.S. this week, along with the European Central Bank meeting. The ECB did not make any important decisions, so macroeconomic data took precedence. However, even the U.S. data did not provoke any market "storm." The week passed, and the pair remained at the same price level as at the beginning.

Looking ahead to next week, we want to note that the holidays officially begin today. Christmas is this week, and the New Year follows next week. Therefore, there will be virtually no fundamental events, and macroeconomic data will be minimal. As a result, many traders may assume that volatility during these days will be at zero. This assumption is reasonable. However, I want to remind you of an important factor: the well-known "law of misfortune," which applies even to the currency market. Last week, everyone was expecting a "storm," but got a "calm." This week, everyone expects a "calm," but could experience a "storm." The market is currently "thin," making it much easier to move prices. Any large trade can provoke significant movement while other market participants enjoy the holidays.

In the Eurozone, there are no releases scheduled for next week, not even minor ones. Thus, traders will be able to trade exclusively based on technical analysis. It is important to remember that the key point remains the flat market on the daily timeframe, where the pair has been for 6 months. This is clearly visible on the corresponding chart. Traders failed to break the upper boundary of the sideways channel at 1.1400-1.1830 last week, so theoretically, we may see a decline toward the lower boundary.

The average volatility of the EUR/USD currency pair over the past five trading days, as of December 22, is 51 pips and is characterized as "medium-low." We expect the pair to trade between 1.1656 and 1.1758 on Monday. The upper regression channel is turning upward, but the flat market on the daily timeframe continues. The CCI indicator entered the oversold area twice in October and visited the overbought area last week. A downward correction is possible, which we are already observing.

Nearest Support Levels:

• S1 – 1.1658
• S2 – 1.1597
• S3 – 1.1536

Nearest Resistance Levels:

• R1 – 1.1719
• R2 – 1.1780
• R3 – 1.1841

Trading Recommendations:

The EUR/USD pair is positioned above the moving average line, with an upward trend maintained across all higher timeframes, while the daily timeframe has been flat for the sixth consecutive month. The global fundamental backdrop remains significant for the market and negative for the dollar. Over the past six months, the dollar has shown occasional weak growth, but only within the sideways channel. There is no fundamental basis for long-term strengthening. If the price is below the moving average, small short positions can be considered, with targets at 1.1658 and 1.1597 based solely on technical factors. Above the moving average line, long positions remain relevant with targets at 1.1780 and 1.1830 (the upper line of the flat on the daily timeframe), which have already been practically achieved. Now the flat must conclude.

Explanations for the Illustrations:

• Linear Regression Channels help determine the current trend. If both are pointing in the same direction, then the trend is currently strong.
• The Moving Average Line (settings 20,0, smoothed) indicates the short-term trend and the direction in which trading should currently proceed.
• Murray Levels – target levels for movements and corrections.
• Volatility Levels (red lines) – probable price channel where the pair will spend the next 24 hours based on current volatility indicators.
• CCI Indicator – its entry into the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.

The material has been provided by InstaForex Company - www.instaforex.com