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EUR/USD - 24H.
During the past week, the EUR/USD pair turned up and began a new round of upward movement. So far, in global terms (on a 24-hour timeframe), this move doesn't look convincing. That is, the pair's quotes remain below the critical line, thus, the prospects for an upward movement are questionable. At the same time, a strong upward trend persists. This is very eloquently signaled by the Ichimoku indicator. The price has so far managed to overcome the Kijun-sen line with difficulty and could not even work out the upper line of the Ichimoku cloud. From a purely technical point of view, everything looks like a banal pullback down, after which the upward trend will resume. Thus, the bears need to strengthen their positions over the next week and not give the initiative back to the bulls. It is difficult to say whether they will succeed or not. During the last correction period, which lasted for 4 months, the pair managed to go from a high to a low of 400 points. At the beginning of the new year, the quotes went down 300 points. Thus, in the current realities of the depreciation of the US currency, this is quite enough to start a new round of upward movement.
During the last reporting week (January 12-18), the EUR/USD pair fell by 80 points. As we have already written above, the pair has started to adjust globally, however, the upward trend is not canceled. The latest COT reports show just that. The previous COT report showed a sharp increase in the net positions of the "Non-commercial" group, the latest COT report also showed that non-commercial traders are increasing their purchase contracts. If the net position increased a week earlier due to a reduction in the number of sales contracts, now the Non-commercial group has opened new 8.2 thousand purchase contracts and only 1.4 thousand sales contracts. Thus, the net position increased again by almost 7 thousand contracts. This means that the mood of the most important group of traders continues to become more "bullish". This is also evidenced by the indicators. The first indicator again shows that the red and green lines are moving away from each other, which indicates the continuation of the trend (in our case, the upward one). The second indicator shows the net position of non-commercial traders, but on the chart. That is, we can see firsthand how their mood becomes more "bullish". From all of the above, we can conclude that the upward trend is highly likely to continue. A couple of months ago, we made the opposite conclusion, however, the bears were so weak that they could not start a new trend.
This week, there were few really important events for the foreign exchange market. There were many high-profile events. For example, the inauguration of Joe Biden, which was held without excesses, rallies, and riots. The new US president immediately began to cancel some of the decisions and decrees of Donald Trump, showing that he radically disagreed with his policies. This means that the course of America will remain the same, but the direction of movement may change quite strongly. Also this week, the ECB held a meeting, at which no important decisions were made. Thus, the most important thing was the press conference with Christine Lagarde and not the results of the meeting. However, Lagarde also did not tell the markets anything fundamentally new. As usual, it was about the high euro rate, low inflation, threats, and risks associated with the "coronavirus" pandemic. Also, this week, Janet Yellen, the former head of the Federal Reserve, and now the US Treasury Secretary, made a voluminous speech. The most important thesis voiced by Yellen was the rejection of attempts to influence the exchange rate of the US currency, as it was under Donald Trump. According to Yellen, her office will not interfere in the exchange rate of the dollar. In general, as we can see, there were many interesting events, but none of them had a special impact on the movement of the pair. For most of the week, the euro currency has been quietly growing, as it likes to do in the last 9-10 months. There is also nothing to highlight from the macroeconomic statistics. Inflation in the EU remained at a negative level. Business activity in the service sector remained below the level of 50.0. Nothing unexpected.
Trading plan for the week of January 24-29:
1) The pair's quotes attempted to resume the upward trend over the past week. We believe that if the bulls manage to return the pair to the area above the critical line, then the upward movement will resume with the first target at the resistance level of 1.2376. An upward trend has already been formed on the hourly timeframe. At the 4-hour chart, you need to overcome the Senkou Span B line to continue moving north. In general, we would say that if we continue to ignore the fundamental background, which has not changed much in recent weeks, then the euro currency has an excellent chance of even greater growth.
2) The downward trend seems to have started, however, it didn't last very long. As long as the price is below the critical line, the downward movement can resume with the targets of the support level of 1.1992 and the Senkou Span B line. However, if the quotes go above Kijun-sen, then the upward trend is highly likely to resume. If there is a rebound from the Kijun-sen line, it will signal the opening of shorts, but extremely neat shorts.
Explanation of the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced before.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
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