FX.co ★ EUR/USD: plan for the European session on January 21. COT reports. Euro bulls defended the 13th figure and aim to return to the 1.1340 level

To open long positions on EUR/USD, you need:

Yesterday, several signals were formed to enter the market. Let's look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to the level of 1.1368 and advised you to make decisions on entering the market. The data on eurozone inflation fully coincided with economists' forecasts, but the report on the growth rate of production prices in Germany surprised - a jump of 5.0% at once compared with the forecast of 0.8%. Against this background, euro bulls attempted to rise above the resistance of 1.1368, but it was unsuccessful. Forming a false breakout at this level created a sell signal, which led to a decline by more than 35 points. In the second half of the day, bears tried to break through the support of 1.1335, but this resulted in forming a signal to buy the euro and an increase of 25 points.

The fact that bulls managed to defend the 13th figure yesterday will allow them to count on the pair's recovery at the end of the week, but it will be quite difficult to do this, given the sharp fall in stock markets and investors' refusal from risky assets. Today there are no important fundamental statistics in the morning and only European Central Bank President Christine Lagarde will give a speech. It is unlikely that she will say something that will be able to seriously support the European currency, so the bulls will have to rely on their own strength. The main task is to protect the support of 1.1303, which was tested during today's Asian session. Forming a false breakout at this level will result in creating a signal to buy the euro, but a larger upward correction will occur only in case the ECB president makes hawkish statements. An equally important task is to cross 1.1340 - the level that the bulls missed during yesterday's US session. A reverse test of this range from above will lead to another buy signal and open up the possibility of recovery to the area: 1.1368 and 1.1398, where I recommend taking profits. A more distant target will be the 1.1425 area. With the pair declining during the European session and the absence of bullish activity at 1.1303, the pressure on the euro may seriously increase. In this case, it is best to postpone long positions to a new low of 1.1273. However, I advise you to open long positions there when forming a false breakout. From the level of 1.1248 and 1.1224, you can buy EUR/USD immediately for a rebound, counting on an upward correction of 20-25 points within the day.

To open short positions on EUR/USD, you need:

The bears continue to control the market, but they failed to cope with the 13th figure on the first attempt. Now an important task is to protect the resistance of 1.1340, in the area of which the moving averages are playing on the bears' side. Forming a false breakout at this level will return pressure to the market and create the first entry point into short positions with the aim of pushing EUR/USD to the area of 1.1303. A breakthrough and a test from the bottom-up of this range will provide another signal to open short positions already with the prospect of falling to new large lows: 1.1273 and 1.1248. A more distant target will be the 1.1224 area, where I recommend taking profits. However, this level will be reached in the event of a panic sell-off of risky assets, which can easily occur in the event of increased talk related to further actions of the Federal Reserve regarding interest rates. If the euro rises and bears are inactive at 1.1340, and it is quite possible that Lagarde will be able to surprise us with something, then it is best not to rush with short positions. The optimal scenario will be short positions when forming a false breakout in the area of 1.1368, by analogy with those that I analyzed above. You can sell EUR/USD immediately on a rebound from 1.1398, or even higher - around 1.1425, counting on a downward correction of 15-20 points.

I recommend for review:

The Commitment of Traders (COT) report for January 11 revealed that long positions had increased while short ones decreased, which led to a change in the negative value of the delta to a positive one. The market is gradually changing and the demand for the European currency, despite the expected changes in the policy of the Federal Reserve, has not gone away. The US inflation data released last week did not make any impression on traders, as the result almost completely coincided with economists' expectations. Against this background, Fed Chairman Jerome Powell spoke quite calmly about future interest rates at a time when many traders expected a more aggressive policy from the central bank. Currently, three increases are projected this year and the first of them will occur in March this year. The sharp decline in retail trade in the United States in December of this year also allows the Fed not to force events. Meanwhile, the European Central Bank plans to fully complete its emergency bond purchase program in March this year. However, the central bank is not going to take any other actions aimed at tightening its policy, which limits the upward potential of risky assets. The COT report showed that long non-commercial positions rose from the level of 199,073 to the level of 204,361, while short non-commercial positions fell from the level of 200,627 to the level of 198,356. This suggests that traders will continue to increase long positions on the euro in order to build an upward trend for the pair. At the end of the week, the total non-commercial net position became positive and reached 6005 against -1554. The weekly closing price rose slightly to 1.1330 against 1.1302 a week earlier.

Indicator signals:

Trading is below the 30 and 50 daily moving averages, which indicates a further fall in the euro in the short term.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

Crossing the lower border of the indicator in the area of 1.1303 will lead to a larger fall in the euro. Crossing the upper border of the indicator in the area of 1.1350 will increase the demand for the pair.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial 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 short and long positions of non-commercial traders.