FX.co ★ Forecast and trading signals for EUR/USD on January 12. COT report. Analysis of Monday. Recommendations for Tuesday

EUR/USD 15M

Both linear regression channels are directed to the downside on the 15-minute timeframe. Therefore, in the short term, there is also a downward trend now and there is not a single sign of an upward correction. The quotes confidently crossed the Senkou Span B and Kijun-sen lines, which significantly increased the likelihood of creating a downward trend.

EUR/USD 1H

The EUR/USD pair continued its downward movement on the hourly timeframe on Monday, which began last week. Thus, the downward movement continued for three consecutive days, within which the US dollar strengthened by 170 points. Not so little. A downward trend channel has been created, which clearly signals a downtrend. Moreover, despite the fact that the channel has a rather strong slope, the pair's quotes also went below it. That is, the downward movement is very strong. But will it last? We should understand why this movement began and what its nature is. At first glance, one can try to associate it with what is recently happening in the United States. First, there was an attack by demonstrators on the Capitol, which was provoked by Donald Trump, then there was talk of a new impeachment of the US President, before that Trump himself made very high-profile posts on social networks (before he was blocked). However, the dollar began to rise in price after these events, a few days later. Moreover, you must admit that it is not entirely logical to see the dollar's growth when the country is systematically approaching a new political crisis. Thus, we believe that the nature of the current fall is purely technical. Traders finally began to take long positions, and therefore a downward pullback began.

COT report

The EUR/USD pair increased by 55 points during the last reporting week (December 29-January 4). Again, minimal price changes, however, the pair has been steadily rising in recent weeks, but at a slow pace. The upward trend remains strong and stable despite the fact that the pair rises or falls by no more than 100 points every week. However, the changes shown in the latest Commitment of Traders (COT) report are also minimal. A group of non-commercial traders opened 2,000 Buy-contracts (longs) and 3,000 Sell-contracts (shorts) during the reporting week. Thus, the net position has formally decreased, and professional traders have become more bearish. However, this is only formally, because non-commercial traders have opened more than 340,000 contracts. Thus, opening/closing 2-3,000 contracts is nothing, a mere drop in the ocean. Moreover, strengthening the bearish sentiment does not mean much, because the COT reports signal the demand for the euro. They don't take into account the demand for the US dollar. When the net position was steadily decreasing (as seen in the second indicator) several months ago, the demand for the euro decreased among large traders. However, we do not exclude the fact that the demand for the dollar also decreased at the same time, therefore, with a visible drop in the interest of large traders in the euro, the single currency grew anyway. An unpleasant moment. In the past few weeks, the changes in the COT reports are such that no conclusions can be drawn at all. If earlier the green and red lines of the first indicator converged or diverged, now they are simply directed sideways, signaling the absence of changes.

Not a single important macroeconomic report from the European Union or the United States on Monday, January 11. However, market participants still do not need any fundamental and macroeconomic information to actively trade. We believe that foundation and macroeconomics are still ignored, therefore, by and large, it does not matter what kind of news comes at the disposal of traders, or whether there is any at all. You can only pay attention to what is happening in the United States. The political crisis, the actions of Donald Trump in his last days as president, and the actions of Congress, which "wants blood" (Trump's impeachment). However, it is unlikely that all these events will be directly reflected on the chart of the EUR/USD pair. The most important thing has already happened anyway. Joe Biden is the future president of the United States and nothing can be done about it.

No major releases scheduled in the United States or Europe on Tuesday, January 12. However, as we mentioned above, it still doesn't make any sense. Recall that last Friday, traders ignored the most important US report on NonFarm Payrolls, which turned out to be significantly worse than forecasts and was supposed to provoke a fall in the dollar. However, instead, the US dollar rose. These were the realities in 2020, and they remain so in 2021.

We have two trading ideas for January 12:

1) Buyers have let go of the initiative, but in the end they also need to take a break. You can consider options for opening new longs when the price has finally settled above the descending channel. At the moment, the targets will be the Kijun-sen (1.2241) and Senkou Span B (1.2263) lines. Take Profit in this case can be up to 50 points. However, the pair needs to move by around 60 points to the upper line of the channel.

2) Bears have recently grown stronger and are taking the pair lower and lower. Of course, not without the help of bulls, who are taking profits at this time. Thus, keep short positions open while aiming for the support level of 1.2097. Take Profit in this case can be up to 50 points. You can open new shorts after rebounding from the upper channel line or the Kijun-sen (1.2241).

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.