FX.co ★ EUR/USD: plan for the US session on January 28 (analysis of morning trades)

To open long positions on EURUSD, you need to:

In my morning forecast, I paid attention to the level of 1.2104 and recommended making decisions based on it. Let's look at the 5-minute chart and talk about where you could enter the market and what happened in the end. A false breakout in the first half of the day in the area of 1.2104 formed a good entry point into short positions, however, the entire movement of the euro downwards stalled. Then the bulls again tried to seize the initiative and got out above the level of 1.2104, forming a certain base on it to form an upward correction and a signal to buy the euro. However, it was not implemented. An upward movement by 15 points and a retracement to the area of 1.2104.

Due to the low volatility, I was forced to revise the morning levels, and now the focus of buyers in the US session is shifted to the area of 1.2126, where the moving averages are held, limiting the upward potential. A break in this range with a top-down test forms a good signal to enter long positions to reach a maximum of 1.2167. In the case of weak data on the US economy, the bulls can count on a more aggressive growth of EUR/USD with an exit to the maximum of 1.2220, and then an update of the resistance of 1.2260, where I recommend taking the profits. In the scenario of a decline in the euro, I recommend looking at long positions only after the formation of a false breakdown in the support area of 1.2083. If the bulls do not show activity, it is best to postpone buying EUR/USD until the test of the new annual low of 1.2026, from which you can open long positions immediately on the rebound in the expectation of an upward movement of 20-25 points within the day.

To open short positions on EURUSD, you need to:

An important task of the bears is to maintain control over the level of 1.2126, and the formation of a false breakout in the second half of the day will be a signal to open short positions with the aim of further downward correction to the support area of 1.2083, where the pair's fall has stalled today. A confident breakdown of this level and its test from the bottom up, together with good indicators for the growth of the US economy in the fourth quarter of 2020, will form an excellent signal for opening short positions. In this case, the next target will be the support of 1.2026, where I recommend fixing the profit. In the scenario of EUR/USD growth in the second half of the day after the GDP data and the breakout of the resistance of 1.2126, it is better not to rush with sales. I recommend waiting for the update of the maximum of 1.2167 and opening short positions immediately for a rebound in the expectation of a downward correction of 20-25 points within the day.

Let me remind you that the COT report (Commitment of Traders) for January 19 recorded a sharp increase in long positions and a slight increase in short ones. Despite all the incoming fundamental data and the continuation of several quarantine restrictions until February this year in many European countries, buyers of risky assets continue to believe in a bullish trend. Especially the demand appears at each significant downward correction from the highs of this year, which allows new major players to enter the market. Vaccination disruptions in Europe are preventing buyers of risky assets from building up their positions more actively, as are weak eurozone fundamentals. However, the prospect of lifting the quarantine will keep the market positive. The risk of extending the quarantine measures in February of this year is still a deterrent to the growth of the euro. The COT report shows that long non-profit positions increased from the level of 228,757 to the level of 236,533, while short non-profit positions increased only from the level of 72,867 to the level of 73,067. Due to the sharp increase in long positions, the total non-commercial net position rose to 163,466 from 155,890 a week earlier.

Signals of indicators:

Moving averages

Trading is conducted below 30 and 50 daily moving averages, which indicates an attempt by the bears to continue the fall of the euro.

Note: The period and prices of the 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

A break of the lower limit of the indicator in the area of 1.2083 will increase the pressure on the euro. A break of the upper limit of the indicator in the area of 1.2220 will lead to growth.

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.