24.01.2023 12:59 PM
EUR/USD: trading plan for American session on January 24. Overview of morning trades. EUR drops despite upbeat PMI figures

When to open long positions on EUR/USD:

In the morning article, I turned your attention to 1.0893 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. The euro rose to 1.0893 before the release of the PMI Index for the eurozone. After that, a false breakout of this level took place. EUR bulls ignored positive data. It led to a sell signal. The pair dropped by 40 pips. For the second half of the day, the technical outlook has remained unchanged.

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In the American session, a batch of macroeconomic reports is on tap, namely the US Manufacturing, Services, and Composite PMI Indices. The EU has already revealed these indices. If the situation is the same and buyers ignore them again, a further decline in EUR/USD looks likely. If the figures are upbeat, it could also exert pressure on the pair. So, I would advise you to refrain from opening long positions. Only a decline and a false breakout of 1.0851 will give a buy signal to open long positions. Traders are likely to rush to take profit from this signal. The target level is the morning resistance level of 1.0893. The pair failed to grow above this level in the morning. A breakout and an upward retest of this range could occur only amid hawkish comments of ECB President Christine Lagarde. So, it may trigger a buy signal with the prospect of a jump to 1.0931. A breakout of this level will also force the bears to close their Stop Loss orders. It will create an additional buy signal. The pair may rise to 1.0970 where I recommend locking in profits. If EUR/USD declines and buyers show no activity at 1.0851, or if there is no rapid growth from this level at a false breakout, it is better to close long positions. Traders are now focused on the support level of 1.0806. Only a false breakout there will provide a new buying opportunity. You could buy EUR/USD at a bounce from a low of 1.0769 or 1.0728, keeping in mind an upward intraday correction of 30-35 pips.

When to open short positions on EUR/USD:

The bears managed to push the pair to the target level. They are now aiming at the support level of 1.0851. Strong US data may trigger a slight spike in market volatility. A breakout and an upward retest of 1.0851 could give a sell signal with the likelihood of moving back to 1.0806. A decline below this level will cause a larger correction to 1.0769, which will initiate the bear market. At this level, I recommend locking in profits. If EUR/USD climbs during the American session, I would advise you to open short positions at the morning resistance level of 1.0893. The euro has already fallen from this level once today. A false breakdown there will provide a new entry point. If the pair does not decrease sharply from 1.0893 in the afternoon, it is better to open short positions at the new resistance level of 1.0931 and after a false breakout. You could sell EUR/USD at a bounce from a high of 1.0970, keeping in mind a downward intraday correction of 30-35 pips.

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COT report

First of all, let us focus on the futures market and changes in the COT report. According to the COT report from January 17, the number of both long and short positions dropped. Traders took the wait-and-see approach after a rapid rise in the euro ahead of the Fed meeting that is scheduled for the next week. Quite weak fundamental data on the US economy, especially a decline in retail sales in December, pointed to the worsening of the overall situation in the country. It means that further monetary policy tightening may lead to even more negative results. On the other hand, inflation continues to slacken, thus allowing the Fed officials to revise the key interest rate hike. Meanwhile, the euro is supported by the ECB's officials who insist on a further key rate hike to combat inflation. Against the backdrop, the euro/dollar pair is reaching new local highs. The COT report unveiled that the number of long non-commercial positions declined by 10,344 to 228,279, while the number of short non-commercial positions slid by 2,346 to 101,295. At the end of the week, the total non-commercial net position decreased to 126,984 from 134,982. All this suggests that investors believe in further growth in the euro but they are still waiting for a clearer picture from central banks on future interest rates. The weekly closing price rose to 1.0833 against 1.0787.

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Indicators' signals:

Trading is carried out below the 30 and 50 daily moving averages. It indicates that the bears are making efforts to take control.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

If EUR/USD moves up, the indicator's upper border at 1.0893 will serve as resistance.

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.
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