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EUR/USD 15M
The linear regression channels turned to the downside on the 15-minute timeframe, which fully corresponds to the current trend on the hourly timeframe. Basically, a sell signal that has been generated does not require any clarification on a lower timeframe. Therefore, we can state the fact that a new downward trend has begun.
EUR/USD 1H
The euro/dollar pair, after the second attempt, still settled below the rising channel on the hourly timeframe on Wednesday, January 27. Recall that earlier the pair quotes formed a false breakout of the lower line of this channel, afterwards they resumed their upward movement. Yesterday, the quotes began a strong downward movement, which can only be associated with the Federal Reserve meeting, as a result the dollar rose by 100 points, surpassing the channel, Senkou Span B and Kijun-sen lines. So now a new downward trend has formed for the pair and you are advised to consider short positions. But first of all, the markets should calm down. Yesterday's fall was almost a landslide. Therefore, you need to wait a bit for the markets to return to their usual trading channel. As for yesterday's recommendations, you were advised to open buy orders when the price rebounds off the lower channel line. This did not happen on January 27. It was recommended to sell the pair when the price settles below the channel with targets at 1.2077 and 1.2054. The price did not reach the second target by just a couple of points. In any case, according to our recommendations, traders could get about 40-50 points of profit.
COT report
The EUR/USD pair fell by 80 points during the last reporting week (January 12-18). As we mentioned above, the pair began to correct globally, however, the upward trend was not canceled. The latest Commitment of Traders (COT) reports show just that. The previous COT report showed a sharp increase in net positions of the "non-commercial" group, the latest COT report also showed that non-commercial traders are increasing their buy contracts (longs). If a week earlier the net position increased due to a reduction in the number of sales contracts (shorts), now the non-commercial group has opened 8,200 new buy contracts and only 1.4 thousand sales contracts. Thus, the net position has grown again, by almost 7,000 contracts. This means that the mood of the most important group of traders continues to become more bullish. Indicators testify to the same. The first indicator shows that the red and green lines are moving away from each other, which indicates that the trend (in our case, the upward trend) is maintained. The second indicator shows the net position of non-commercial traders, but on a chart. That is, we can clearly see how they are becoming more bullish. From above, we can conclude that the uptrend will continue with a high degree of probability. We drew the opposite conclusion a couple of months ago, but the bears turned out to be so weak that they could not start a new trend.
No interesting events or news in the European Union on Wednesday. Markets were entirely focused on the Federal Reserve meeting and its results. However, this topic will be covered in the fundamental articles. Here we will try to look at the current foundation more globally. We have to return again and again to the point that the euro currency has risen by 1,700 points over the past ten months. Perhaps now is the time for a banal correction? For a correction before a new prolonged growth? We have already said that if Congress approves the 1.9-trillion stimulus package, it could help the dollar fall. Therefore, we believe that this is the most important factor. And this package is likely to be approved. Therefore, after the current correction, a new upward trend may begin.
No major events planned in the European Union on Thursday, and the United States will publish its GDP figure for the fourth quarter, which, according to forecasts, can grow by 4.2% in quarterly terms. If the real value of the indicator is not lower than 4.2%, this may provide additional support to the dollar. If lower, then traders may recall the fact that the collapse in GDP in the second quarter was so strong that the economy has not yet recovered and it may take several more quarters or even years to make up for the losses. Thus, +4.2% looks good, but in practice it means only a weak recovery after an absolutely landslide fall.
We have two trading ideas for January 28:
1) Buyers have let go of the initiative. Thus, the trend has changed to a downward one. Therefore, in the current environment, we would recommend treating open positions with caution. You can try to buy the pair with a clear rebound from the 1.2054 level with targets at 1.2077 and 1.2111. You can buy the pair when the price settles above the Senkou Span B line (1.2140) with targets at 1.2158 and 1.2190. Take Profit in these cases can be up to 50 points.
2) Bears are finally active and have managed to pull down the pair. However, in order to confirm their intentions to form a downward trend, they now need to surpass the 1.2054 level. You are advised to open short positions in case of a rebound from the Kijun line (1.2126) with targets at 1.2077 and 1.2054. Take Profit in this case can be up to 60 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.
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