EUR/USD 15M
Both linear regression channels are directed to the upside on the 15-minute timeframe. And so trading has changed to an upward one in the short term. Now traders need to overcome the Kijun-sen line, afterwards there will be much less obstacles for the pair. It looks like the price will try to return to 2.5-year highs.
EUR/USD 1H
The euro/dollar pair was trading more actively on Tuesday compared to the previous day, when Martin Luther King Day was celebrated in the United States and the markets were in a complete hibernation state. Yesterday, the pair began a fairly strong upward correction, thanks to which the quotes settled above the descending channel. Thus, the downward trend has been canceled for now, and the price needs to confidently surpass the Kijun-sen line, afterwards the upward trend may resume. Although the pair is now in a rather ambiguous situation. On the one hand, the price shows readiness to move up on the hourly chart. On the other hand, going outside the descending channel can be an accident. However, we advise you to act strictly according to the technical picture. Simply because the fundamentals are weak now, but traders ignored them even when they were strong. Thus, in principle, as a factor, the fundamental background is now rather weak. Therefore, buyers need to wait for the price to settle above the critical line in order to trade up, and short positions are not relevant now.
COT report
What to say about COT reports now? The last four reports showed minimal changes in the number of open contracts. Accordingly, there are minimal changes in the mood of professional traders. The latest report recorded an increase of 8,700 contracts on a net position at once. Thus, the gap between Buy-contracts and Sell, which was clearly in favor of buyers, increased even more (229,000 against 76,000). Speaking in terms of numbers, there is a high likelihood of renewed growth for the euro, although just a couple of months ago, major players were openly preparing for a new downward trend. They braced for it, but in the end they admitted the error of this preparation. We still believe that the weak demand for the dollar is to blame. Therefore, the greenback prevented the euro/dollar pair from falling. But if this factor persists in the coming months (speculative), then the dollar may resume its long-term decline. Other groups of traders and their data are less important now. The most important thing to understand is that the markets are quite ready to keep buying the euro and getting rid of the dollar. Even with the opposite fundamental background.
No important publications or news from the European Union and the United States on Tuesday. As we mentioned earlier, there are several powerful topics that could theoretically influence the pair's movement. But they don't. Then what is the point of paying attention to the latest statements of Donald Trump, to Joe Biden's intentions to redraw all US policy for himself after Trump, to the almost unquestionable package of stimulus measures that the Democrats can take purely on their own, to the speech of Janet Yellen, who does not believe that the exchange rate should be influenced by the central bank or the government? All this is nothing more than just interesting information. Neither the euro nor the dollar pay any attention to it.
The consumer price index for December will be published on Wednesday. Expectations are for it to remain negative at -0.3% y/y. This means that inflation will remain as deflation. Christine Lagarde has said this more than once – low inflation is caused by the high exchange rate of the euro. This hinders the recovery of the European economy. We only have the inauguration of Joe Biden for today in the United States. We hope that the whole event will be held without any excesses.
We have two trading ideas for January 20:
1) Buyers return to the game as the price settles above the descending channel. Thus, the trend has changed to an upward trend. You are advised to open new long positions while aiming for resistance levels of 1.2179 and 1.2228. Take Profit in this case can be up to 80 points. There are certain concerns that the exit of quotes from the channel may be false, but there are still no other grounds for trading now.
2) Bears have let go of the initiative. Therefore, short positions will not be appropriate for a while. Although if the pair fails to settle above the Kijun-sen line (1.2138) (there will be a clear and eloquent rebound), then you can even try to sell the euro/dollar while aiming for 1.2026. Take Profit in this case can be up to 90 points. However, in this case, trading down is recommended with small volumes.
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.
