EUR/USD 15M
Both linear regression channels are directed to the downside on the 15-minute timeframe, which signals a downward trend in the short term. A sell signal that formed on Tuesday does not need to be clarified on a lower timeframe. You can take profits around the 1.2001 level.
EUR/USD 1H
The euro/dollar pair resumed its downward movement on the hourly timeframe on February 2, breaking the 1.2058 level on the third attempt. Thus, the level that restrained the price from falling did not resist. The dollar continued to strengthen, which we have been waiting for the last few months. At the moment, this growth is purely corrective in nature. But any trend begins with a small movement, which is initially interpreted as a correction. The downward trend line continues to support bearish traders. The trend is now downward. In our last review of the euro/dollar, we advised you to trade bullish if the price rebounds from the 1.2058 level, but this rebound should have been very clear. That did not happen. We advised you to open new short positions if the price overcomes the 1.2058 level and such a consolidation occurred yesterday. Therefore, traders could open new shorts in order to aim for the support level of 1.2001. The chart also shows that the price bounced off the Kijun-sen line, but this moment should not mislead traders, since the line initially reached the 1.2087 level, and after that the critical line fell on it. Thus, there was no rebound at all.
COT report
The EUR/USD pair rose by 60 points during the last reporting week (January 19-25). Thus, in the long term, an unambiguous conclusion is made: the upward trend persists and can resume at any time. The Commitment of Traders (COT) reports, which shows the sentiment of major market players, could indicate a decline in interest in the euro. However, they do not testify to this. On the contrary, the penultimate COT report showed a sharp increase in bullish sentiment among the non-commercial group. They opened as many as 8,000 new buy contracts (longs). The latest COT report, which just came out, did not show crucial changes, but it did show a bullish mood again. This time, non-commercial traders opened 3,300 buy contracts (longs) and closed 1,200 sell contracts (shorts). Thus, the net position for professional traders has grown again, by 4,500. Not too much, but not too little. And most importantly, such figures do not allow us to conclude that the upward trend is over. Of course, this does not mean that until major players begin to reduce the number of Buy-contracts, the euro will not fall. But if we evaluate only the COT report, then we can not make a conclusion about the end of the upward trend.
The European Union published a report on GDP, which unexpectedly exceeded the forecast values and amounted to -0.7% in quarterly terms and -5.1% in annual terms. Forecasts predicted a decrease in GDP in the fourth quarter by at least 1% in quarterly terms. Thus, the euro had an excellent opportunity to interrupt the negative trend of 2021, but market participants decided that it was high time to start ignoring the macroeconomic background again. Thus, from our point of view, the key factors that now affect the rate of the euro/dollar pair are "the ratio of the EU and US economies" and "the US stimulus package stuck in Congress." The US dollar may continue to rise until Congress approves a new economic aid package.
The index of business activity in the service sector for January will be released on Wednesday. According to analysts' forecasts, the most problematic area of the economy during a pandemic and quarantine will remain in the same state as a month earlier. Business activity may be 45.0, which is below the key level of 50.0. The inflation report for January will also be published today, which, according to forecasts, may unexpectedly accelerate from -0.3% y/y to + 0.4%. It is difficult to say what could be the reason for such a jump, but this is clearly a positive factor for the euro. If market participants have chosen the tactics of ignoring the macroeconomic background, then all these data will be irrelevant.
We have two trading ideas for February 3:
1) Buyers still do not have the initiative as the price continues to be below the downward trend line. Thus, we recommend buying the pair if the price settles above the downward trend line with targets at the resistance levels of 1.2158 and 1.2190. Take Profit in these cases can be up to 50 points.
2) Bears continue to hold the initiative and pull down the pair. Therefore, we continue to recommend trading bearish while aiming for the support level of 1.2001, since the price settled below the 1.2058 level. Take Profit in this case can be up to 60 points. You are advised to open new short positions while aiming for 1.2001 if the price bounces off the Kijun-sen line (1.2087) or the 1.2058-1.2068 area.
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.
