TikTok U.S. Ban Looms as Trump Prepares for Inauguration Day
Weak Bullish Momentum Signals Extended Downtrend
Last week the Euro gained the upper hand on the US Dollar but the modest gains made by the single currency indicated that the downtrend is likely to continue. EUR/USD bounced again at 1.0220, after piercing it but despite this bullish rejection pattern, the pair couldn’t move above the resistance at 1.0350.
Donald Trump and China’s President Xi had a phone call meeting, which was deemed positive by the President-elect and generated upside for risk assets. Among the matters discussed were fentanyl, TikTok, and trade policy. President Xi saw the call as positive as well and expressed optimism regarding China – U.S. relations.
In other news, the U.S. Supreme Court backed the Congress’ decision to shut down TikTok in the U.S. starting Sunday, January 18. President-elect Trump said that a solution should be found but at this time it is unclear what that solution would be.
Economic Calendar Highlights
Banks in the U.S. will be closed on Monday in observance of Martin Luther King Jr. Day. Donald Trump’s inauguration as the 47th American President will take place Monday as well. It is unclear how the markets will react to the inauguration speech but volatility may increase at the time. Also Monday, the WEF meetings will start in Davos and will last the whole week.
Tuesday’s highlight will be the German ZEW Economic Sentiment, scheduled for release at 10:00 am GMT.
Wednesday at 3:15 pm GMT, ECB President Christine Lagarde will participate in a panel discussion at the WEF meetings in Davos. The event may go unnoticed unless there are some surprises.
Friday will be sprinkled with PMI releases, starting early at 8:15 am GMT with the French Manufacturing and Services PMIs and followed 15 minutes later by the same indicators for the German economy. At 9:30 am GMT, the U.K. will announce the same PMIs and finally, at 2:45 pm GMT, it will be the U.S.’s turn to release the Manufacturing and Services PMIs.
Technical Outlook – EUR/USD
After going below 1.0220, the pair did not rally strongly, although the downtrend looks overextended. After a long journey down, the euro bulls should have been able to put on a better show and take the pair higher considering the bounce at a strong support.
This shows that currently, the bulls lack the strength to stage a full reversal. However, the pair may go up just to take a breather, triggered by profit-taking and overextension, not necessarily buying pressure.
The levels to watch are 1.0220 as support and 1.0350 as resistance. For the pair to start a more significant rally, we will need to see the price above the bearish trend line and above the 50-day Moving Average.
