25.01.2023 01:04 PM
Forecast for EUR/USD on January 25. ECB shows its determination

Yesterday, the EUR/USD pair carried out a new consolidation above the corrective level of 200.0% (1.0869). As a result, there is now an enhanced likelihood that the pair will continue to grow. The nearest target is 1.1000. However, given that the pair's movement is currently practically horizontal and that the level of 1.0869 is easily breached by traders, I would like to point out that it is no longer a reliable source of strong signals.

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The market is still dominated by bull traders. Last but not least, their power is related to Christine Lagarde's rhetoric, who has often indicated recently that the regulator's primary concern continues to be the high inflation rate in the European Union. The president of the ECB made it clear that the regulator opposes excessive inflation and the consolidation of its effects on the economy. She will therefore exert all of her efforts to get it back to 2%. Her statements imply that the ECB will keep raising the interest rate. And these remarks can also be interpreted as a willingness to increase the rate following two meetings, the results of which are widely believed to be known to traders. All of this encourages bull traders, and the occasional release of conventional economic indicators has just a little impact on their attitudes.

Yesterday, the European Union announced business activity indicators. Manufacturing and the composite index in the services sector outperformed traders' forecasts, although they also continued to stay below the 50 mark. Any value below this point is regarded as negative. The indices appear to have increased as a result, but they continue to be negative. Since no inferences could be made from this report, traders chose to ignore it. Today will be a much more boring day, which will affect the activity of traders. Although their activity in recent days has already been low.

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The pair had a new turnaround in favor of the euro on the 4-hour chart, and it is now advancing toward the corrective level of 50.0% (1.0941). The US dollar will benefit from rising quotes from this level, while others will fall toward the Fibo level of 38.2% (1.0610). Once more, the upward trend corridor describes the traders' attitude as "bullish." I don't anticipate the euro falling significantly before the corridor closes. The CCI indicator's "bearish" divergence may favor some decline of the pair in the next few days.

Report on Commitments of Traders (COT):

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During the previous reporting week, traders opened 2,346 short contracts while also closing 10,344 long contracts. The large traders' bullish attitude is still present but has dipped slightly. Currently, 228 thousand long contracts and 101 thousand of short contracts are all concentrated in the hands of traders. The COT figures show that the European currency is now growing, but I also see that the number of long positions is over 2.5 times greater than the number of short positions. The likelihood of the euro's expansion has been steadily increasing over the past few months, just like the euro itself, but the information background does not always support it. After a protracted period of hardship, the euro's status is now improving, and its future looks promising. Until the ECB gradually raises the interest rate by increments of 0.50%, at least.

The news calendar for the United States and the European Union:

The United States and the European Union have no scheduled economic events on January 25. Today's traders won't be affected by the information background's sentiment.

Forecast for EUR/USD and trading advice:

On the 4-hour chart, sales of the pair are feasible if it recovers from the level of 1.0941 with goals of 1.0869 and 1.0750. With goals of 1.1000 and 1.1150, new purchases of the euro currency are feasible when the 4-hour chart closes above the level of 1.0941.

Samir Klishi,
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