The position of the US dollar continued to weaken yesterday against its main competitors, but there was a low activity in the market.

It was hard to analyze something in the economic calendar, since it is almost empty. Important statistics from Europe, UK and US were not published and thus, the market followed the last set movement.

What happened on the trading chart?

The EUR/USD pair went into a pullback stage after finding a pivot point in the form of December 9 local high (1.2059). As a result, the quote returned to the previously reached range of 1.2130/1.2170.

The recovery phase of the euro relative to the corrective movement 1.2349 ---> 1.2053 is shown in the market, but it has an insignificant scale. Therefore, a decline is likely, where the range of 1.2130/1.2170 may act as a resistance.

The GBP/USD pair is moving in an inertial upward trend from the pivot point of 1.3519, from which market participants are trying to re approach the area of the conditional high of the mid-term trend.

In the market, this movement is considered as a recovery relative to the decline of 1.3708 to 1.3519.

Trading recommendations on EUR/USD and GBP/USD for January 20, 2021

The data on UK inflation will be published today. Its level is expected to rise from 0.3% to 0.6%, which may positively affect the pound sterling's exchange rate.

UK Inflation - 7:00 Universal time

Next, traders will wait for Europe's inflation to be released, where its level is forecasted to remain unchanged (0.3%). In other words, deflation in Europe has been dragging for five consecutive months. It is obvious that this fact does not add optimism, which could lead to the euro's weakening.

Europe Inflation - 10:00 Universal time

If we analyze the current trading chart of EUR/USD, it can be seen that the quote is within the range of 1.2130/1.2170, where there is a low activity and the upper timeframe has not yet been touched.

If the quote fails to consolidate above the level of 1.3170 in the H4 timeframe, sellers will have a chance to decline again in the direction of 1.2060. The range of 1.2130/1.2170 will serve as a resistance in the market.

As for the current trading chart of the GBP/USD, it can be noticed that the inertial increase still takes place in the market, where it is possible to touch the resistance area of the mid-term upward trend of 1.3690/1.3710. In the case of a repetition of the natural basis of the past, the resistance area can lead to a reduction in the volume of long positions (buy positions), which can result in another price rebound.

An alternative scenario of the market development will be considered if the price stays above 1.3710 for a four-hour period, which may lead to a resumption of the mid-term trend.