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31.01.2023 01:05 PM
Analysis of EUR/USD on January 31. Bullish trend remains strong

Hi everyone! The EUR.USD pair rose higher moving in the sideways channel. Later, it dropped to the lower border of the channel. However, it managed to rebound to 1.0900. If the pair settles below the sideways channel, a downward movement to 1.0750 looks likely.

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On Monday, the trajectory of the pair remained unchanged. It was moving in a narrow range. Traders are now looking forward to the results of the Fed and the ECB meetings which are scheduled for Wednesday and Thursday. Of course, the pair is not flat. However, there are no entry points due to the sideways movement. GDP report for the eurozone could trigger volatility. However, I believe that traders could ignore this data. The fact is that there have been many reports on GDP or PMI Indices over the last weeks of January. However, the movements of the pair were unaffected by them. I wouldn't be surprised if by the end of the week, we see the same sideways movement but slightly more volatile than now.

Besides, traders have already priced in the results of the Fed and ECB meetings. This is why the market reaction to rate decisions may be muted on Wednesday or Thursday. The GDP report is important but investors are aware of what to expect from these reports in the near future. The EU economy is expected to slow down. The US and UK economies may also contract. Analysts wonder how sharp their downturn could be. If all three economies are losing steam, the US dollar or the euro will hardly rise amid such economic reports. The pair is rather vulnerable to news on interest rates and inflation.

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On the 4-hour chart, the pair is aiming at 1.0941, the Fibonacci correction level of 50.0%. If the pair drops from this level, it may reach 1.0610, the Fibo correction level of 38.2%. The uptrend corridor indicates that the mood of traders is bullish. I do not expect a strong fall in the euro before closing below the corridor. However, it may drop slightly due to the bearish divergence of the CCI indicator.

Commitments of Traders (COT):

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Commitments of Traders (COT):

Last week, speculators opened 9,464 long positions and 2,099 short ones. The mood of large traders remains bullish. It has slightly strengthened. The total number of long positions amounts to 238,000 and the number of short ones totals 103,000. The euro keeps climbing at the moment, which is in line with the COT reports. However, the number of long positions is almost two and a half times higher than the number of short ones. Over the past few months, the bullish sentiment has been constantly growing as well as the euro. However, sometimes it lacked drivers. The market situation is favoring the euro after a prolonged downtrend. So, its prospects remain positive at least as long as the ECB raises the interest rate in steps by 0.50%.

Economic calendar for US and EU:

EU– GDP report for the fourth quarter (10:00 UTC).

On January 31, the economic calendar for the US and the EU includes only one report. The impact of fundamental factors on the market sentiment will be very weak today.

Outlook for EUR/USD and trading recommendations:

It is better to sell the pair if it retreats from 1.0941 on the 4-hour chart with target levels of 1.0869 and 1.0750. It is recommended to open short positions if it closes below the sideways channel. Pivot points are the same. It would be wise to open long positions if it rises above 1.0941 on the 4-hour chart with target levels of 1.1000 and 1.1150. You may buy the pair if it rebounds from the lower border of the sideways channel with the target level of 1.0900.

Samir Klishi,
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