EUR/USD - 24H.
Another week in the foreign exchange market and forex has ended, and what results can we make? As we have said in previous reviews, one of the key technical factors was formed last week on the 24-hour timeframe. The price perfectly worked out the 50.0% Fibonacci level from the last round of growth of the euro/dollar pair, as well as the Senkou Span B line. From both obstacles, the quotes bounced, forming a powerful upward signal as a result. During this week, when this signal was supposed to be worked out, we saw a very logical upward movement. All on the same 24-hour timeframe, the quotes rose to the Kijun-sen line and ended the week near it. Now, for further growth of the pair, the bulls must push through the critical line. However, another option is still not completely excluded: the price will spend some more time inside the Ichimoku cloud. However, we still do not recommend trading on the 24-hour timeframe. It is better to use it to search for global signals and trends, and then work them out on lower charts.
The COT report.
During the last reporting week (February 2-8), the EUR/USD pair fell by 10 points. The movement was more volatile during the five working days, however, price changes are minimal. During the same time, a group of Non-commercial traders opened 4.7 thousand buy contracts and closed 2.6 thousand sell contracts. Thus, their mood became more "bullish", and the net position increased by 7.3 thousand contracts. Of course, a week earlier, the COT report showed much more extensive changes. A week earlier, professional traders massively closed buy contracts on the euro currency. However, the downward trend from this did not end. We have already several times insisted on the special option in the long term. According to this option, the pair has sufficiently corrected downwards and now has excellent chances for a new upward trend. Data from the COT report a week ago cast doubt on this option, however, the latest COT report shows a renewed strengthening of "bullish" sentiment among major market players. The indicators also eloquently show that the overall mood remains positive in the market. The green and red lines of the first indicator, which show the net positions of the "Non-commercial" and "Commercial" group of traders, began to narrow again a week ago, but are still far from each other. In the long term, based solely on the COT reports, we can say that the end of the upward trend has been brewing for a long time. But what can you do if the demand for the US dollar remains zero?
This week, there was a lot of potentially interesting news and reports, most of which market participants again ignored. This week, for example, Christine Lagarde and Jerome Powell spoke. However, their rhetoric did not particularly impress the markets. In the middle of the week, the euro/dollar pair generally "died" and gave out mind-blowing volatility of 35-40 points per day. Central bankers again complained about the lack of stimulus to the economy, which will recover long and hard after the pandemic and the crisis. Also, Powell and Lagarde talked about their plans for how to restore the economy. Powell calls for reviving the labor market as quickly as possible, Lagarde believes that the most important thing is an investment in the economy. In addition to these speeches, the US consumer price index and forecasts from the European Commission on key economic indicators for the next two years were published. The European Commission's forecasts for the current year were lowered, which means that the growth rate of the recovery is falling. Lagarde also spoke about this, calling for the distribution of the 750 billion euro economic recovery fund to begin as soon as possible. Inflation in the United States, after several consecutive months of acceleration, fell slightly (the indicator excluding food and energy). However, this indicator is not too interested in the markets. Thus, we can say that the pair continues to move solely on technical factors, as well as on the "global fundamental factors" that we constantly talk about.
Trading plan for the week of February 15-19:
1) The pair's quotes bounced off the Senkou Span B line and the 50.0% Fibonacci level of 1.1975 and started moving up. Thus, we would recommend at this time to continue buying the pair in small lots with the expectation of forming a new upward trend. The nearest target for the next week or two is the resistance level of 1.2305, which is located near the 2.5-year highs, to which buyers will eventually strive. However, they have yet to successfully cross the Kijun-sen line. On the 4-hour timeframe, the upward trend is already formed.
2) The downward trend will now have a chance to resume only if the bears manage to overcome the Senkou Span B line on the 24-hour timeframe and at the same time the 50.0% Fibonacci level. If this happens, we will recommend new sales with targets of support levels of 1.1885 and 1.1778. Much still depends on the "global fundamental factors", and they remain not in favor of the US dollar.
Explanation of the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced before.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
