Risk-Off Mode Before Trump’s Inauguration

Dear Traders,

Yesterday’s trading was not to our liking and euro traders in particular, had to struggle with loss-making price swings. A trading idea’s success often depends on the details and so we finally had to record losses with our short entry in the EUR/USD mainly because we have set our profit target 5 pips too low. However, although such days are challenging they are part of trading.

The euro tested the 1.06-support which proved able to withstand yesterday’s downward pressure. For the euro to ignite fresh bearish momentum traders should now wait for prices below 1.0580. On the upside, the 1.0750-level remains interesting and may limit potential gains in the EUR/USD. A break above 1.0760 however, could prompt bulls to buy euros towards 1.08 and 1.0850.

Meanwhile, the ECB announcement proved to be a non-event for traders as Mario Draghi refrained from commenting on interesting topics such as tapering, Trump or Brexit. With no changes to the ECB’s monetary policy course and the lack of new statements the meeting was of minor importance.

The pound sterling traded firmly above 1.2280 while gains have been capped at 1.2340. Only during the Asian session the pound was finally able to overcome the 1.2350-level. We will now focus on a break above 1.2370 which may drive the pound towards 1.2440. Above 1.2460 we see a next hurdle at 1.25. Sterling bears shall however focus on important support levels at 1.22 and 1.2150. If the pound drops below these levels we expect accelerated bearish momentum.

Traders should keep an eye on the U.K. Retail Sales report due at 9:30 UTC which could have a short-term impact on the pound.

Risk-off mode in the market before Trump’s inauguration 

Investors stayed on the sidelines in view of the market uncertainties. The dollar rally faded as market participants remember that there is a high degree of uncertainty surrounding the unpredictable Trump administration. Only time will tell what the new U.S. president has to offer.

Traders will look to Trump’s inauguration speech for further details that may shape the dollar’s outlook over the coming months. We expect high volatility in the markets when the speech is due at around 17:00 UTC. Let’s be surprised.

We wish you good trades and a beautiful weekend.

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