FX.co ★ Forecast and trading signals for EUR/USD on January 6. COT report. Analysis of Tuesday. Recommendations for Wednesday

EUR/USD 15M

Both linear regression channels are directed to the upside with a slight bias on the 15-minute timeframe. Thus, the upward trend continues even on the smallest timeframe. Nevertheless, it will not continue to rise until the quote surpasses the 1.2395-1.2310 area.

EUR/USD 1H

The EUR/USD pair was trading near local highs on the hourly timeframe on Tuesday, January 5, which it managed to reach in late 2020 and early 2021. So far, the 1.2310 level is the peak for this period. However, given the current rate of the pair, 20-30 points is not enough until this high has been renewed... That is, with a high degree of probability, buyers will continue to put pressure on the pair, and the euro will continue to grow. Quotes continue to trade within a long-term upward channel. Thus, the upward trend remains relevant despite the fact that the pair was settling below the upward trend line. The most important technical factor right now is the 1.2295-1.2310 resistance area. The price rebounded off it three times. However, it did not go far, so we are waiting for the fourth test and, if necessary, the fifth. The bears' prospects will open up only if the price settles below the rising channel.

COT report

The EUR/USD pair fell by 30 points during the last reporting week (December 22-28). Minimal price changes, however, the EUR/USD pair has been steadily moving up in recent weeks, but at a slow pace. Thus, it was not necessary to hope for serious changes in the mood of professional traders. On the eve of the New Year, a group of non-commercial traders closed 57 Buy-contracts (longs) and opened 1,660 Sell-contracts (shorts). Thus, formally, their mood became more bearish, but in fact, the net position of this category of traders decreased by only 1,600 contracts. For comparison, the total number of contracts for this group of traders is 340,000. Thus, changes by 1,500 are scanty. In general, the bullish sentiment remains. A few weeks ago professional traders were actively reducing their net position and we concluded that a new downward trend was on the way. However, the demand for the dollar was so low in the foreign exchange market that the downward trend did not start for the euro, and non-commercial traders began to increase the number of longs again. For the last two weeks, no conclusions can be drawn at all about the change in their mood. Indicators also do not help much in this situation, since the changes are minimal. The green and red lines of the first indicator no longer move towards each other, but they are not moving away either. The second indicator shows that the net position of non-commercial traders decreased in the long term, but it is not significant and has stopped in the last month and a half.

A couple of secondary reports concerning Germany were published in the European Union on Tuesday. However, even considering the fact that these reports were not significant, they still did not contain anything interesting. The unemployment rate in Germany remained unchanged. Retail trade rose by a couple of percent in November. More interesting was the ISM Manufacturing PMI. It rose from 57.5 to 60.7, a very high value which means that the US industry continues to gain momentum and is doing great overall. This means that the US economy will continue to recover. The economy will soon receive another $900 billion in aid from the government, which will also help it recover as quickly as possible. Unfortunately, we cannot draw similar conclusions about the European economy. The second lockdown will almost certainly have a negative impact on its condition in the fourth quarter...

The European Union is scheduled to publish an index of business activity in the service sector on Wednesday, January 6. The US is set to publish the ADP report on the change in the number of employed in the private sector. This report is the second most important after NonFarm Payrolls, reflecting the state of the labor market. We can make an assumption that it will not be worse than forecasts, in any case, unemployment in the US continues to decline, and the economy is recovering. The US dollar cannot extract any dividends from this yet.

We have two trading ideas for January 6:

1) Buyers keep the initiative in their hands. They manage to keep the pair inside the rising channel, so chances of continuing the upward movement remain high. You are advised to open new long positions in case the price rebounds from the lower channel line or from the Senkou Span B line (1.2220) while aiming for the resistance level of 1.2291. Take Profit in this case can be up to 60 points. In case the quote surpasses the 1.2395-1.2310 area, you are advised to open longs while aiming for 1.2365.

2) Bears remain very weak at the moment and cannot settle below the rising channel. Thus, you are advised to open short positions if the bears manage to overcome the lower line of the rising channel with targets at the support levels of 1.2162 and 1.2107, not earlier. Take Profit in this case can range from 40 to 100 points.

Forecast and trading signals for GBP/USD

Explanations for illustrations:

Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.

Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.

Support and resistance areas are areas from which the price has repeatedly rebounded off.

Yellow lines are trend lines, trend channels and any other technical patterns.

Indicator 1 on the COT charts is the size of the net position of each category of traders.

Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.