EUR/USD 15M
Both linear regression channels turned to the downside on the 15-minute timeframe, but this does not provide any clarity at all. The price ignores strong lines and areas, generates false signals, therefore trading at this time is associated with increased risks.
EUR/USD 1H
The EUR/USD pair resumed its downward movement on the hourly timeframe on January 7, afterwards, it fell to the lower line of the long-term rising channel at the end of the day. Formally, the price even rebounded off this line, although the chart does not show that it reached the line. However, the channel is long-term. There may be slight inaccuracies in these time frames. Thus, for now, we believe that the rebound from the lower channel line is complete.
The question is, what will traders do with this rebound? Do the bulls have the desire and strength to start a new round of longs on the euro, which still looks completely unfounded? Or will the price settle below the channel and start creating a more logical downward trend? Or will it just start flat? All these questions are now quite difficult to answer. In our fundamental analysis, we have already said that it is very difficult to analyze what is happening in the market now. The pair is moving randomly. Thus, we advise you to be careful and use only strong and clear signals. It is better to open fewer trades than to receive unnecessary losses.
COT report
The EUR/USD pair fell by 30 points during the last reporting week (December 22-28). Minimal price changes, however, the EUR/USD pair has been steadily moving up in recent weeks, but at a slow pace. Thus, it was not necessary to hope for serious changes in the mood of professional traders. On the eve of the New Year, a group of non-commercial traders closed 57 Buy-contracts (longs) and opened 1,660 Sell-contracts (shorts). Thus, formally, their mood became more bearish, but in fact, the net position of this category of traders decreased by only 1,600 contracts. For comparison, the total number of contracts for this group of traders is 340,000. Thus, changes by 1,500 are scanty. In general, the bullish sentiment remains.
A few weeks ago professional traders were actively reducing their net position and we concluded that a new downward trend was on the way. However, the demand for the dollar was so low in the foreign exchange market that the downward trend did not start for the euro, and non-commercial traders began to increase the number of longs again. For the last two weeks, no conclusions can be drawn at all about the change in their mood. Indicators also do not help much in this situation, since the changes are minimal. The green and red lines of the first indicator no longer move towards each other, but they are not moving away either. The second indicator shows that the net position of non-commercial traders decreased in the long term, but it is not significant and has stopped in the last month and a half.
The European Union published a rather important inflation indicator for December. The consumer price index remained unchanged in annual terms and is equal to -0.3%. Thus, deflation remains in the European Union, which is not least associated with the euro’s strongest growth in the last nine months. Thus, one can even conclude that such low inflation is artificial. However, it still has a negative impact on the economy. Central banks have been aiming for 2% inflation for over a long period of time, and there is a reason behind this. This kind of inflation ensures the most stable economic growth. Now in the European Union, since the euro is too expensive, export volumes are falling, which negatively affects income and GDP. The EU retail trade for November was also released, which unexpectedly fell by as much as 6.1% on a monthly basis. Thus, the latest EU reports were weak and the euro was also falling that day! Did the impossible happen and the markets worked out the macroeconomic data?
Today, the European Union will publish the unemployment rate for November, which may rise to 8.5%. Take note that the unemployment rate in the EU continues to grow, while it has been decreasing in America for months now. However, the US will publish much more important reports in the afternoon, the unemployment rate, as well as NonFarm Payrolls and data on changes in wages. Of course, the NonFarm Payrolls report will be the top priority today.
We have two trading ideas for January 8:
1) Buyers keep the initiative in their hands. They manage to keep the pair inside the rising channel, so chances of resuming the upward movement are still preserved. You are advised to open new long positions in case the price rebounds from the lower channel line (one can say, it is fulfilled) or when it surpasses the 1.2295-1.2311 area, while aiming for the resistance level of 1.2365. Take Profit in this case can be up to 90 points. However, take note that the pair’s movements are currently unstable.
2) Bears remain very weak at this time and cannot yet gain a foothold below the rising channel. Thus, you are advised to open short positions if the bears manage to overcome the lower line of the rising channel with targets at the support levels 1.2162 and 1.2107, not earlier. Take Profit in this case can range from 60 to 120 points.
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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