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20.01.202208:00 Forex Analysis & Reviews: EUR/USD: plan for the European session on January 20. COT reports. The euro has failed, and the bears are aiming for the 13th figure

To open long positions on EUR/USD, you need:

Yesterday, several signals were formed to enter the market. Let's look at the 5-minute chart and figure out what happened. The slight strengthening of the European currency, which was observed in the first half of the day, did not lead to an update of the levels that I described in detail in my morning forecast. Because of this, no signals were formed to enter the market. Inflation data in Germany completely coincided with economists' forecasts, which kept market volatility at the usual low level for the first half of the day. During the US session, we saw several failures to settle above the resistance of 1.1353, which each time led to a false breakout and a signal to sell the euro. Given the low volatility of the market, the downward movements were 15-20 points.

Exchange Rates 20.01.2022 analysis

The technical picture has undergone a number of changes that are very important for building further upward movement on the pair. Given that trading is conducted in the area of moving averages, it is difficult to understand which side the market will take in the short term. Undoubtedly, the bulls' main task is to protect the support of 1.1335, which was formed following yesterday's results. Forming a false breakout at this level will lead to creating a signal to buy the euro, but the pair will grow only in case of good fundamental data on the eurozone. Today we are expecting reports on the German producer price index and the eurozone consumer price index. The euro may also react positively to the European Central Bank's December report from the monetary policy meeting. An equally important task is a breakthrough of 1.1368, above which it has not yet been possible to get out of today. A reverse test of this level from above will lead to another buy signal and open up the possibility of a new jump to the area: 1.1397 and 1.1425, where I recommend taking profits. The 1.1453 area is a more distant goal. With the pair declining during the European session and the lack of bullish activity at 1.1335, it is best to postpone long positions until the base of the 13th figure. However, I advise you to open long positions there when forming a false breakout. From the 1.1265 level, you can buy EUR/USD immediately for a rebound, counting on an upward correction of 20-25 points within the day.

To open short positions on EUR/USD, you need:

The technical picture has undergone a number of changes that are very important for building further upward movement on the pair. Given that trading is conducted in the area of moving averages, it is difficult to understand which side the market will take in the short term. Undoubtedly, the bulls' main task is to protect the support of 1.1335, which was formed following yesterday's results. Forming a false breakout at this level will lead to creating a signal to buy the euro, but the pair will grow only in case of good fundamental data on the eurozone. Today we are expecting reports on the German producer price index and the eurozone consumer price index. The euro may also react positively to the European Central Bank's December report from the monetary policy meeting. An equally important task is a breakthrough of 1.1368, above which it has not yet been possible to get out of today. A reverse test of this level from above will lead to another buy signal and open up the possibility of a new jump to the area: 1.1397 and 1.1425, where I recommend taking profits. The 1.1453 area is a more distant goal. With the pair declining during the European session and the lack of bullish activity at 1.1335, it is best to postpone long positions until the base of the 13th figure. However, I advise you to open long positions there when forming a false breakout. From the 1.1265 level, you can buy EUR/USD immediately for a rebound, counting on an upward correction of 20-25 points within the day.

Exchange Rates 20.01.2022 analysis

I recommend for review:

The Commitment of Traders (COT) report for January 11 revealed that long positions had increased while short ones decreased, which led to a change in the negative value of the delta to a positive one. The market is gradually changing and the demand for the European currency, despite the expected changes in the policy of the Federal Reserve, has not gone away. The US inflation data released last week did not make any impression on traders, as the result almost completely coincided with economists' expectations. Against this background, Fed Chairman Jerome Powell spoke quite calmly about future interest rates at a time when many traders expected a more aggressive policy from the central bank. Currently, three increases are projected this year and the first of them will occur in March this year. The sharp decline in retail trade in the United States in December of this year also allows the Fed not to force events. Meanwhile, the European Central Bank plans to fully complete its emergency bond purchase program in March this year. However, the central bank is not going to take any other actions aimed at tightening its policy, which limits the upward potential of risky assets. The COT report showed that long non-commercial positions rose from the level of 199,073 to the level of 204,361, while short non-commercial positions fell from the level of 200,627 to the level of 198,356. This suggests that traders will continue to increase long positions on the euro in order to build an upward trend for the pair. At the end of the week, the total non-commercial net position became positive and reached 6005 against -1554. The weekly closing price rose slightly to 1.1330 against 1.1302 a week earlier.

Indicator signals:

Trading is conducted in the area of 30 and 50 daily moving averages, which indicates some market uncertainty with the further direction.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

Crossing the lower border of the indicator in the area of 1.1335 will lead to a larger fall in the euro. Crossing the upper border of the indicator in the area of 1.1355 will increase the demand for the pair.

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
  • MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
  • Long non-commercial positions represent the total long open position of non-commercial traders.
  • Short non-commercial positions represent the total short open position of non-commercial traders.
  • Total non-commercial net position is the difference between short and long positions of non-commercial traders.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Miroslaw Bawulski,
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