FX.co ★ Forecast and trading signals for EUR/USD on February 23. COT report. Analysis of Monday. Recommendations for Tuesday

EUR/USD 1H

The euro/dollar pair was trading very, very calmly on the hourly timeframe on February 22. After rebounding from the extremum level of 1.2145, the pair's quotes began a round of downward correction, but also rebounded from the critical Kijun-sen line, which provoked the resumption of the upward movement and by the end of the day the pair found itself near the 1.2145 level again. If the price eventually confidently overcomes this level, then the upward movement will continue. In our foundational articles, we regularly look at why this particular scenario is most likely. We advise you to familiarize yourself with it. However, there are also negative aspects. For example, there is no trend line or channel to support bull traders. The last upward trend line reversed, but the downward movement was short-lived. Plus, we remind you that there was a rebound from the Senkou Span B line and the 50.0% Fibonacci level on the 24-hour timeframe. And this is a very strong signal for continuing the upward trend. In our last review, we advised you to buy the pair if the price surpasses the Kijun-sen line. The given targets were near the extremum level of 1.2145. We are glad to state that this signal was generated and traders could earn about 35 points from it. A sell signal also appeared in the form of a rebound from the Kijun-sen line, but it appeared at night and after the rebound, traders had to move Stop Loss to breakeven. Therefore, if traders received losses on this signal, then they should be minimal.

EUR/USD 15M

Both linear regression channels are directed to the upside on the 15-minute timeframe. Thus, an upward trend has formed in the short term, and the Kijun-sen line has remained behind. Now the price should confidently surpass the 1.2145 in order for the upward movement to continue. So far, the price has not been able to stay above this level for more than an hour, so there is no consolidation.

COT report

The EUR/USD pair rose by 70 points during the last reporting week (February 9-15). Volatility during this period of time was practically minimal. In the chart above, you can see that the pair, in principle, has not significantly decreased over the past weeks. We are constantly talking about a corrective January, but if you look at the chart, it becomes clear that this correction, compared to the entire 11-month upward trend, is simply nothing. A banal rollback. Thus, in general, we can conclude that market participants still do not favor the dollar and do not believe in it. Furthermore, the Commitment of Traders (COT) report from two weeks ago recorded a sharp drop in the number of Buy-contracts (longs) for the "non-commercial" group of traders. Then the net position of non-commercial traders dropped 33,000 contracts at once. It seems to be a good start for a downward trend, but the following week the COT report recorded an increase in the net position of major players, and the latest report that was released this Friday showed changes, albeit minimal, in favor of the bulls. That is, professional traders have taken up buying the euro once again. Around 2,500 new buy contracts were opened, as well as 1,300 Sell-contracts (shorts). The changes, respectively, are minimal and do not greatly affect the overall picture of the state of affairs. Thus, the overall picture remains in favor of the bulls, as more than 220,000 buy contracts and only 84,000 sell contracts remain open. The indicators below the chart clearly show that the trend is no longer becoming bearish. The green and red lines of the first indicator reflecting the net positions of the groups of traders "non-commercial" and "commercial" do not converge, therefore the current trend remains in effect.

No macroeconomic report from the European Union on Monday. It's the same in the US. The only event of the day was the speech of the head of the European Central Bank Christine Lagarde, who, judging by the pair's movements during the day, did not report anything interesting to the markets. However, no one expected anything special from her. Traders are clearly aware of her views on economics and monetary policy. They haven't changed. Lagarde said: "The €1.85 trillion under the PEPP program gives us significant power and flexibility in purchasing long-term government bonds. The ECB will continue to support all sectors of the economy while maintaining funding during the pandemic."

The European Union is scheduled to publish a relatively important report on inflation. As a reminder, in December, the consumer price index rose abnormally from -0.3% y/y to + 0.9% y/y, which caused a lot of questions. Now the markets need to find the answer, what is the reason for such a rise in inflation? This is, of course, a positive moment for the eurozone, but until last month, inflation for five months was deflation... according to analysts, no major changes are expected compared to December. The US consumer confidence indicator will be released today, which with a 90% probability will be ignored by the markets.

We have two trading ideas for February 23:

1) Buyers quickly put the initiative back in their hands. Thus, we recommend that you continue to open new long positions with targets at 1.2183 and 1.2190, if traders manage to execute a clear and precise consolidation above the 1.2145 level. Take Profit in this case can be up to 40 points, which is not so bad considering the current volatility values. You can also open longs while aiming for 1.2145 with a new rebound from Kijun-sen.

2) Bears let go of the initiative, as they let the price rise above the critical line. Thus, you are advised to open short positions if the price settles below the Kijun-sen line (1.2097) while aiming for the Senkou Span B line (1.2060) and the 1.2037 level. Take Profit in this case can be up to 50 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.