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EUR/USD: plan for the European session on January 17. COT reports. Euro returned to the bottom of the 14th figure. Bears

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Relevance up to 05:00 2022-01-18 UTC+00

To open long positions on EUR/USD, you need:

Last Friday, several signals were formed to enter the market. Let’s look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to the 1.1453 level and advised you to make decisions on entering the market. After the pair moved down amid the lack of important statistics on the eurozone and the overbought European currency, the bears managed to settle below this range, and the test of this area from the bottom up, which took place in the afternoon, formed several good signals to sell the euro, which caused the pair to fall by more than 25 points to the next support of 1.1426. There, the bulls defended the level at the first test, forming a buy signal from it, but this only led to a correction of no more than 10 points.

The technical picture has undergone a number of changes, which are very important for building a further upward trend for the pair. So far, the bulls have nothing to worry about, but I advise you to focus on the nearest support in the area of 1.1401. The Eurogroup will hold a meeting today, and there are no other fundamental reports except the consumer price index in Italy. Volatility may be extremely low against this background, especially since Martin Luther King Day is celebrated in the United States. The bulls’ main task is to protect the support of 1.1401, which was formed following last Friday’s results. Forming a false breakout there and good data on the Italian consumer price index can push the euro to rise to the resistance area of 1.1440, where the moving averages are playing on the bears’ side, which will limit the pair’s upward potential. Crossing this range is still an important task, and the reverse test from top to bottom will open up the possibility of a new jump to the levels: 1.1481 and 1.1514, where I recommend taking profits. The 1.1562 level is a more distant target. With a further decline during the European session and the absence of bullish activity at 1.1401, it is best to postpone long positions to a larger support of 1.1363. However, I advise you to open long positions there when forming a false breakout. You can buy EUR/USD immediately for a rebound from the level of 1.1324 while counting on an upward correction of 20-25 points within the day.

To open short positions on EUR/USD, you need:

Bears have built a good downward correction ignoring the bad data on retail sales in the United States. Crossing 1.1401 is necessary to continue the pair’s decline, but before that, you need to think carefully about how to protect the resistance of 1.1440. In case EUR/USD grows during today’s European session, only the formation of a false breakout at 1.1440 can create the first entry point into short positions in hopes of returning the pressure and a decrease in EURUSD to the Friday support area of 1.1401. There are moving averages around 1.1440, which will also help the bears to protect this level. A breakthrough and a bottom-up test of 1.1401 will provide another signal to open short positions with the prospect of falling to a large low like 1.1363, where the bulls will be more active, since there is the last chance to hold the upward trend in the euro. Going beyond this range will change the market direction to a downward one and demolish a number of bulls’ stop orders, which will cause EUR/USD to fall to the lows: 1.1324 and 1.1294, where I recommend taking profits. In case the euro grows and the bears are active at 1.1440, it is best not to rush with short positions. The optimal scenario will be short positions when forming a false breakout in the area of last week’s high – 1.1481. You can sell EUR/USD immediately on a rebound from 1.1514, or even higher – around 1.1562, counting on a downward correction of 15-20 points.

I recommend for review:

The Commitment of Traders (COT) report from January 4 revealed a sharp increase in long positions and contraction in short positions that had an impact on the negative delta’s value. It indicates that the market is changing its sentiment and demand for EUR has recovered despite the Fed’s hawkishness and its shift towards aggressive monetary tightening. The highlight of the week is an inflation report from the US. The US CPI is expected to jump above 7% in December. Investors will revise their portfolios following the inflation report. Fresh evidence of soaring inflation will push the US central bank into raising interest rates sooner than later. Another thing is that the US labor market is improving steadily. In this context, we can reckon that the US regulator might increase interest rates at least 4 times this year. The ECB is going to withdraw its emergency bond-buying program in full in March 2022. However, the regulator does not plan other moves towards tightening its monetary policy. This dovish stance caps the upside potential of risky assets. According to the last COT report, long non-commercial positions grew to 199,073 from 196,595 for the week. At the same time, short non-commercial positions dropped from 206,757 to 200,627. It proves that traders are poised to add long positions on EUR/USD bearing in mind a further upward correction of EUR/USD. By and large, the overall non-commercial net positions declined from -10,162 to -1,554. EUR/USD closed last week a bit higher at 1.1302 against 1.1277 a week ago.

Indicator signals:

Trading is conducted below the 30 and 50 daily moving averages, which indicates that the downward correction of the pair continues.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

Crossing the upper border of the indicator in the area of 1.1455 will lead to a new wave of growth. A breakthrough of the lower boundary of the indicator in the area of 1.1400 will increase pressure on the pair.

Description of indicators

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

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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Elliott wave analysis of EUR/JPY for January 17, 2022

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