27.01.202104:46 Forex Analyse & Reviews: Forecast and trading signals for EUR/USD on January 27. COT report. Analysis of Tuesday. Recommendations for Wednesday


Exchange Rates 27.01.2021 analysis

Both linear regression channels turned to the upside again on the 15-minute timeframe, which fully corresponds to the current trend on the hourly timeframe. The red circle shows that the price spent less than 45 minutes below the 1.2120 level, thus, consolidation below the channel on the hourly timeframe did not actually occur. Now the euro/dollar pair may continue to move up and update local highs.


Exchange Rates 27.01.2021 analysis

The euro/dollar pair dropped to the lower line of the rising channel and even settled below it for a short period of time on the hourly timeframe on Tuesday, January 26. The pair spent about half an hour below the 1.2120 level. Therefore, this breakout could be considered false because the time spent below the channel was split into two hourly candles. And so, this can be considered a rebound from the lower boundary of the channel, respectively, it was possible to open long positions while aiming for the Senkou Span B line and the 1.2190 level, as we recommended in yesterday's review. The signal, of course, was not the clearest. I had to study a smaller timeframe in order to clearly understand how much time the price spent below the rising channel. Nevertheless, the upward trend has been preserved, there is a buy signal, and traders could earn about 30-50 points from it. Now, since the rising channel remains in effect, you need to look for new buy signals, that is, wait for pullbacks within the upward trend.

COT report

Exchange Rates 27.01.2021 analysis

The EUR/USD pair fell by 80 points during the last reporting week (January 12-18). As we mentioned above, the pair began to correct globally, however, the upward trend was not canceled. The latest Commitment of Traders (COT) reports show just that. The previous COT report showed a sharp increase in net positions of the "non-commercial" group, the latest COT report also showed that non-commercial traders are increasing their buy contracts (longs). If a week earlier the net position increased due to a reduction in the number of sales contracts (shorts), now the non-commercial group has opened 8,200 new buy contracts and only 1.4 thousand sales contracts. Thus, the net position has grown again, by almost 7,000 contracts. This means that the mood of the most important group of traders continues to become more bullish. Indicators testify to the same. The first indicator shows that the red and green lines are moving away from each other, which indicates that the trend (in our case, the upward trend) is maintained. The second indicator shows the net position of non-commercial traders, but on a chart. That is, we can clearly see how they are becoming more bullish. From above, we can conclude that the uptrend will continue with a high degree of probability. We drew the opposite conclusion a couple of months ago, but the bears turned out to be so weak that they could not start a new trend.

No interesting events or news in the European Union and the United States on Tuesday. More precisely, there was news, as usual, but political, epidemiological and whatever, just not economic. For example, in Italy, according to unofficial information, Prime Minister Giuseppe Conte resigned. Given the fact that anti-European sentiments have been brewing in Italy for a long time, the country has been called the next in the list of possible exit countries after Great Britain. If Conte really resigned, this means that early elections may take place in the country, which could lead to a strengthening of the position of eurosceptics in the government. Plus, do not forget that Italy is one of the most problematic countries in the eurozone. Italy was one of the most affected countries during the period of the coronavirus pandemic, it received one of the largest grants from the Economic Recovery Fund for 750 billion euros. Previously, Rome had problems with the budget and compliance with EU regulations. The Italians, in turn, were not always happy with their presence in the EU, so eurosceptics may not win the elections, but they can initiate ItalExit.

The results of the Federal Reserve meeting will be wrapped up on Wednesday. This is a very high-profile event in name, but in fact it may not be more interesting than the ECB meeting. The Fed rate is unlikely to change. Recently, there have been rumors that the Fed may curtail the stimulus program or significantly reduce it, but we believe that these are just rumors. Rather, on the contrary, Fed Chairman Jerome Powell will continue to "knock out" aid to the economy from Congress. Thus, Powell's dovish rhetoric may help the euro in rising in line with the general trend.

We have two trading ideas for January 27:

1) Buyers keep coming back to the game and keep pushing the pair. Thus, the trend remains upward. It is recommended to open new long positions while aiming for resistance levels 1.2190 and 1.2223 with a new rebound from the lower channel line or from the 1.2158 level. Take Profit in this case can be up to 80 points. If the pair settles below the channel, this will reverse the upward trend and the relevance of long positions.

2) Bears are still in standby mode. Therefore, short positions are irrelevant now. You can consider short positions again if the price settles below the rising channel (at the end of the hour). In this case, you are advised to open new shorts while aiming for support levels 1.2111 and 1.2077. Take Profit in this case can be up to 45 points. You can also try to trigger a rebound from the 1.2190 level with targets at 1.2158 and the Kijun-sen line (1.2133).

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.

Uitgevoerd door Paolo Greco,
Analytische expert
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