Relevance up to 11:00 2022-01-25 UTC+00
To open long positions on EURUSD, you need:
In my morning forecast, I paid attention to the 1.1337 level and recommended making decisions on entering the market from it. Let’s look at the 5-minute chart and figure out what happened. Important data on activity in the service sector and the manufacturing sector of the eurozone countries turned out to be quite diverse. However, the overall composite index for the eurozone declined in January this year, which did not allow buyers to get above the resistance of 1.1337 even against the background of strong data on activity within the German economy. A false breakdown at 1.1337 led to a signal to sell the euro, but at the time of writing, there was also no major drop. The downward movement was about 15 points from the entry point. From a technical point of view, nothing has changed for the afternoon. And what entry points were there by the pound this morning? And what entry points were there by the pound this morning?
Traders will be waiting for reports on the American economy because they will help clarify the situation a little bit in what form the American economy is at the beginning of this year. The primary task of euro buyers is to protect the support of 1.1303, which acts as the lower boundary of a kind of side-channel in which the pair can spend the entire first half of this week before the publication of the results of the Federal Reserve’s monetary policy meeting. The formation of a false breakdown at the level of 1.1303 forms a signal to buy the euro, but another larger upward correction will occur only in the case of poor data on the index of business activity in the manufacturing sector, the index of business activity in the services sector and the composite index of the US PMI. It is unlikely that the reports will disappoint traders, so I advise you to treat euro purchases quite carefully. An equally important task for buyers remains the breakdown of 1.1337 – it was not possible to get above this range in the first half of the day. This area is a kind of middle of the side channel, where, among other things, moving averages pass, limiting the upward potential of the pair. A reverse test of this range from above will lead to an additional buy signal and open up the possibility of recovery to the area: 1.1368 and 1.1398, where I recommend fixing the profits. A more distant target will be the 1.1425 area. With the pair declining during the American session and the absence of bull activity at 1.1303, the pressure on the euro may seriously increase. In this case, it is best to postpone purchases to a new low of 1.1273. However, I advise you to open long positions there when forming a false breakdown. From the level of 1.1248 and 1.1224, you can buy EUR/USD immediately for a rebound with the aim of an upward correction of 20-25 points within the day.
To open short positions on EURUSD, you need:
Sellers coped with the task of defending the resistance of 1.1337 today, but the lack of an active movement of the euro down proves the wait-and-see position that the bears took before the two-day meeting of the Federal Reserve on monetary policy. While trading will be conducted below this range, you can count on a decline to the base of the 13th figure. The additional formation of a false breakdown at 1.1337 will confirm the presence of large players in the market who expect the euro to fall in the short term. A breakdown and a bottom-up test of 1.1303 will give an additional signal to open short positions with the prospect of reaching new lows: 1.1273 and 1.1248. A more distant target will be the 1.1224 area, where I recommend fixing the profits. However, this level will be reached in the event of a panic sell-off of risky assets, which can easily occur with an increased talk related to further actions of the Federal Reserve System about interest rates. Strong data on activity in the US will also be a good reason to build up short positions in EUR/USD. In the event of a re-growth of the euro and the absence of bear activity at 1.1337, the optimal scenario will be short positions when forming a false breakdown in the area of 1.1368. You can sell EUR/USD immediately for a rebound from 1.1398, or even higher – around 1.1425 with the aim of a downward correction of 15-20 points.
The COT report (Commitment of Traders) for January 11 recorded an increase in long positions and a reduction in short ones, which led to a change in the negative value of the delta to a positive one. The market is gradually changing and the demand for the European currency, despite the expected changes in the policy of the Federal Reserve System, has not gone away. The US inflation data released last week did not make any impression on traders, as the result almost completely coincided with economists’ expectations. Against this background, Federal Reserve Chairman Jerome Powell spoke quite calmly about future interest rates at a time when many traders expected a more aggressive policy from the central bank. Currently, three increases are projected this year and the first of them will occur in March this year. The sharp decline in retail trade in the United States in December of this year also allows the Fed not to force events. Meanwhile, the European Central Bank plans to fully complete its emergency bond purchase program in March this year. However, the regulator is not going to take any other actions aimed at tightening its policy, which limits the upward potential of risky assets. The COT report indicates that long non-profit positions rose from the level of 199,073 to the level of 204,361, while short non-profit positions fell from the level of 200,627 to the level of 198,356. This suggests that traders will continue to increase long positions on the euro to build an upward trend for the pair. At the end of the week, the total non-commercial net position became positive and amounted to 6005 against -1554. The weekly closing price rose slightly to 1.1330 against 1.1302 a week earlier.
Signals of indicators:
Trading is conducted below 30 and 50 daily moving averages, which indicates that the market remains under the control of sellers.
Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Growth will be limited by the upper level of the indicator in the area of 1.1350. A break of the lower limit in the 1.1315 area will increase the pressure on the pair.
Description of indicators
Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
MACD indicator (Moving Average Convergence / Divergence – moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
Bollinger Bands (Bollinger Bands). Period 20
Non-profit 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.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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