FX.co ★ EUR/USD: plan for the American session on January 4 (analysis of morning deals)

To open long positions on EURUSD, you need to:

In my morning forecast, I paid attention to the level of 1.2267 and recommended to act from it. If you look at the 5-minute chart, you can see how the sellers managed to protect this area during the first test, however, this did not lead to a larger sale. Then, after the release of reports on manufacturing activity in the eurozone countries, which in December was much better than the November indicators, the bulls took the level of 1.2267. On the chart, I highlighted the area where a signal was formed to buy the euro after the breakout and consolidation of the bulls above this range. The growth was about 30 points to the resistance area of 1.2304, where I recommended taking the profit.

Bulls are now focused on this level, as only its breakdown and consolidation above will lead to a new wave of euro growth. Updating 1.2304 from top to bottom will open a direct road to the maximum of 1.2339, and a more distant target will be the area of 1.2417, where I recommend fixing the profits. It is worth noting that only a consolidation above 1.2339 will resume the upward trend in the euro. In the second half of the day, we have similar data on the US economy, which will indicate the state of the manufacturing sector. Quite acceptable figures are expected, which may limit the upward potential of EUR/USD. In the scenario of a decline in the pair, it is best not to hurry with purchases, but to wait for the formation of a false breakdown in the area of 1.2267, where the moving averages that play on the side of buyers have already pulled up. If there is no activity in this area, I recommend opening long positions only for a rebound from the minimum of 1.2236, based on an upward correction of 15-20 points within the day.

To open short positions on EURUSD, you need to:

Sellers of the euro tried to defend the resistance of 1.2267, however, nothing good came of it. Now they need to think about how to keep the pair below the annual highs in the area of 1.2304, which are aimed at breaking buyers. The formation of a false breakout will form a signal to open short positions with the main goal of reducing to the support of 1.2267, where buyers will try to return to the market. A break and consolidation below 1.2267 will open a direct road to the lows of 1.2236 and 1.2205, where I recommend taking the profits. If the bears miss the maximum of 1.2304 in the second half of the day, and this will happen only with poor PMI indicators for the US manufacturing sector, then it is best to return to short positions in the area of 1.2339 or sell EUR/USD immediately for a rebound in the resistance area of 1.2417, counting on a downward correction of 20-30 points within the day.

Let me remind you that the COT report (Commitment of Traders) for December 21 recorded the growth of short positions and the growth of long positions. Buyers of risky assets continue to believe in a bull market amid news that vaccination against the first strain of coronavirus has begun in Europe. However, due to the quarantine measures taken after the detection of a new strain of COVID-19 that appeared recently in the UK, there are still quite a lot of problems. Thus, long non-profit positions rose from the level of 218,710 to the level of 222,443, while short non-profit positions jumped to the level of 78,541 against 76,877. The total non-profit net position rose to 143,902 from 141,833 a week earlier.

Signals of indicators:

Moving averages

Trading is above 30 and 50 daily moving averages, indicating a slight advantage for euro buyers

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.

Bollinger Bands

In the event of a decline in the pair, support will be provided by the average border of the indicator in the area of 1.2267. A break of the upper limit of the indicator in the area of 1.2304 will lead to a new wave of growth of the euro.

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.