EUR/USD 15M
Both linear regression channels turned down on the 15-minute timeframe. Thus, the downward trend continues in the short term. Consequently, the euro/dollar pair will continue to strive for the 1.2097 level. There are no prerequisites for bringing back the upward trend right now, but this does not mean that traders cannot start buying the euro again right now.
EUR/USD 1H
The EUR/USD traded quite calmly on the hourly timeframe on Thursday, January 14. Quotes were near the previous local low for some time, afterwards they broke through it, but could not fall even deeper. Nevertheless, sellers practically managed to reach the second support level of 1.2097. In general, the downward trend continues, which is eloquently signaled by the descending channel. Thus, prior to getting the quotes to settle above it, one should consider trading for a fall.
We have stated on several occasions that we are expecting a new downward trend, but we should admit that bears remain extremely weak. The upward trend can resume at any time. The most unpleasant thing is that from a fundamental point of view, it is quite difficult to explain the euro’s growth over the past few months, and it is also difficult to explain the strengthening of the dollar in 2020. In fact, nothing could support the dollar in America in 2020. Moreover, nothing negative has happened in the European Union either. Therefore, all this movement looks more like a banal technical correction, and the main trend will resume after it ends.
COT report
The EUR/USD pair increased by 55 points during the last reporting week (December 29-January 4). Again, minimal price changes, however, the pair has been steadily rising in recent weeks, but at a slow pace. The upward trend remains strong and stable despite the fact that the pair rises or falls by no more than 100 points every week. However, the changes shown in the latest Commitment of Traders (COT) report are also minimal. A group of non-commercial traders opened 2,000 Buy-contracts (longs) and 3,000 Sell-contracts (shorts) during the reporting week. Thus, the net position has formally decreased, and professional traders have become more bearish. However, this is only formally, because non-commercial traders have opened more than 340,000 contracts. Thus, opening/closing 2-3,000 contracts is nothing, a mere drop in the ocean. Moreover, strengthening the bearish sentiment does not mean much, because the COT reports signal the demand for the euro. They don’t take into account the demand for the US dollar. When the net position was steadily decreasing (as seen in the second indicator) several months ago, the demand for the euro decreased among large traders. However, we do not exclude the fact that the demand for the dollar also decreased at the same time, therefore, with a visible drop in the interest of large traders in the euro, the single currency grew anyway. An unpleasant moment. In the past few weeks, the changes in the COT reports are such that no conclusions can be drawn at all. If earlier the green and red lines of the first indicator converged or diverged, now they are simply directed sideways, signaling the absence of changes.
No important macroeconomic events took place in the European Union on Thursday. Meanwhile in America, traders were waiting for Federal Reserve Chairman Jerome Powell’s speech and Joe Biden’s economic development plan, but from our humble point of view, this will just be ignored, like 90% of the fundamental background in the last 9-10 months. Biden’s plan, especially the part about stimulating the economy, is very interesting, but a plan is just a plan. Just like campaign promises, they are just promises. Biden will have four years to prove that he deserves a second term. Therefore, one should hardly expect a democrat to start right off the bat. Whatever his plan, investors can hardly be expected to rush to buy or sell the dollar based on it. Roughly the same goes for Powell’s speech. Traders have already ignored European Central Bank President Christine Lagarde’s speech this week, so what are the chances of a violent reaction after Powell’s speech?
To date, no important events are planned in the European Union. Several secondary reports will be published in America, which have very little chance of being worked out by the markets. The most significant of these are industrial production and retail sales. From these reports, we will be able to understand how the economy is recovering after the coronavirus crisis, but we can hardly expect the dollar to rise or fall in price for them.
We have two trading ideas for January 15:
1) Buyers continue to rest and wait for the bears to be full. The pair corrected enough yesterday, so the downward movement may continue. You can consider options for opening new long positions when the price settles above the descending channel. In this case, the targets will be the Senkou Span B line (1.2240) and the resistance level of 1.2314. Take Profit in this case can range from 50 to 120 points.
2) Bears have grown stronger recently and have not yet let go of the initiative. Thus, short positions can be held open while aiming for support levels like 1.2097 and 1.2002. Take Profit in this case can be up to 120 points. You are advised to open new shorts in the event of a rebound from the upper channel line.
Forecast and trading signals for GBP/USD
Explanations for illustrations:
- Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
- Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
- Support and resistance areas are areas from which the price has repeatedly rebounded off.
- Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders. Indicator 2 on the COT charts is the size of the net position for the “non-commercial” group.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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