Last Friday, there was only one signal for market entry. Let's take a look at the 5-minute chart and discuss what happened. In my previous forecast, I focused on the level of 1.0787 and recommended making market entry decisions based on it. The pair grew, but due to low volatility, which was just around 20 pips, the 1.0787 level was not tested. Accordingly, the pair did not form any relevant entry signals. In the afternoon, a false breakout at 1.0788 and a sell signal did not bring the expected profit due to low volatility.
For long positions on EUR/USD
Last Friday, the German inflation data, which coincided with economists' forecasts, and the speeches of European Central Bank officials Joachim Nagel and Piero Cipollone provided a bit of support for the euro. Therefore, the euro had a chance to recover in the absence of important US data. Today, the euro may receive support from the European Commission's forecast and from the ECB officials' remarks. If their tone remains firm or aggressive, the pair will likely correct higher.
I will act on a decline after a false breakout near the nearest support at 1.0777, which is in line with the bullish moving averages. This will create a good entry point into long positions, providing an opportunity for a corrective move towards the area of 1.0810. A breakout and a downward test of this range will create another entry point for long positions, targeting 1.0835. The ultimate target is found at the 1.0864 high, where I plan to take profits. Should EUR/USD decline and show no activity at 1.0777 in the first half of the day in the absence of important data, the pressure on the pair will return and this could lock the pair in a sideways channel. In this case, I will try to enter the market after a false breakout forms near 1.0751. I would consider opening long positions on a rebound from 1.0725, aiming for an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
Last Friday, the bears tried to put pressure on the euro, but it didn't work out. Today, it is necessary to defend the new resistance at 1.0810. The pair could move towards this level after the European Commission releases its forecasts. Protecting this level and forming a false breakout there, along with a soft stance from the ECB officials, may exert pressure on the pair, which could send EUR/USD down to the area of 1.0777 - a new support that was established last Friday. A breakout and consolidation below this range, as well as an upward retest, will provide another selling entry point with the expectation of the pair's decline to the area of 1.0751. The ultimate target here is the 1.0725 low, where I plan to take profits. In case EUR/USD moves upwards during the European session without bearish activity at 1.0810, buyers will continue to win back positions. In such a case, it will be possible to enter the market after a test of the next resistance at 1.0835. It is also possible to sell there but only after a failed consolidation. I plan to initiate short positions on a rebound from 1.0864, aiming for a downward correction of 30-35 pips.
COT report:
In the COT report (Commitment of Traders) for January 30, there was an increase in both long and short positions. After the Federal Reserve meeting, it became clear that no one is planning to change anything for now. Moreover, the latest US reports on GDP and labor market suggest that interest rates need to be kept high for as long as possible. Lowering them now could lead to another surge in inflationary pressure, which the central bank has been grappling with for almost two years. This week promises to be quite calm in terms of economic reports, so we can expect the bearish trend for the euro to persist and the US dollar to strengthen. The COT report indicated that long non-commercial positions increased by 5,170 to 200,360, while short non-commercial positions increased by 4,723 to 111,589. As a result, the spread between long and short positions increased by 666.
Indicator signals:
Moving averages:
Trading above the 30- and 50-day moving averages indicates a bullish attempt to continue the upward movement.
Please note that the time period and levels of the moving averages are analyzed only for the 1H chart, which differs from the general definition of the classic daily moving averages on the 1D chart.
Bollinger Bands
If EUR/USD declines, the indicator's lower border near 1.0770 will serve as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;
• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.