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EUR/USD 1H
The euro/dollar pair tried to leave the 1.2111-1.2145 range on the hourly timeframe on February 16, in which it had been in for several days. It succeeded in the end. However, not quite as traders expected. First, the price settled above the 1.2145 level, which indicated a desire to continue rising. However, only a few hours have passed, and the price has already turned down, which led to consolidation below the upward trend line and changed the trend to a downward one. Thus, at the end of the day, the bears managed to seize the initiative, but how long will they last? So far, we expect to see a decline to the Senkou Span B line. Furthermore, everything will depend on whether the price overcomes this line or not. Since there was no important news and reports on Tuesday, we can not conclude that the movements were provoked by the foundation or macroeconomics. Consequently, it was extremely difficult to predict such a course of events. In yesterday's review, we advised you to buy the pair while aiming for the resistance level of 1.2173, if the bulls manage to settle above the 1.2145 level. This signal was generated, but it was not possible to reach the target level, although it was located quite close. A strong downward movement followed in the second half of the day and deals had to be closed at Stop Loss, which should have been located below the 1.2145 level. Furthermore, a buy signal was formed in order for the price to settle below the trend line. This signal enables us to open short positions while aiming for the support level of 1.2058. And at the moment it is still valid.
EUR/USD 15M
Both linear regression channels turned to the downside on the 15-minute timeframe, but not immediately. One gets the feeling that the current fall of the pair is a temporary phenomenon. We would like to draw your attention to the fact that the previous local low, which is clearly visible in the chart, was not updated, the price fell short by around 10 points. Moreover, it is not clear what caused the decline. Thus, it is possible that the upward movement will resume today.
COT report
The EUR/USD pair fell by 10 points during the last reporting week (February 2-8). The movement, of course, was more volatile during the five working days, however, price changes, as we can see, are minimal. At the same time, the group of "non-commercial" traders opened 4,700 buy contracts (longs) and closed 2,600 sell contracts (shorts). Thus, they became more bullish, and the net position increased by 7,300 contracts. Of course, a week earlier the Commitment of Traders (COT) report showed much larger changes. A week earlier, professional traders massively closed buy contracts for the euro. However, the downward trend did not end there. We have already insisted on a correctional option in the long term several times. According to this scenario, the pair has corrected to the downside enough and currently has excellent chances for a new upward trend. The data of the COT report from a week ago questioned this option, but, as we can see, the latest COT report shows rising bullish sentiments among major market players. The indicators also eloquently show that the overall sentiment remains bullish in the market. The green and red lines of the first indicator, which represent the net positions of the non-commercial and commercial groups, began to narrow again a week ago, but are still far from each other. In the long term, based solely on the COT reports, we can say that the end of the upward trend has been brewing for a long time. But what if the demand for the US dollar remains non-existent?
No macroeconomic event in the United States, and a rather important report on GDP for the fourth quarter of 2020 was published in the EU. This report turned out to be better than predicted values and reached -5%. So today traders could have counted on the European currency's growth. Instead, the pair fell in the afternoon, although there was no apparent reason for that. Thus, we tend to believe that the reasons for this decline are purely technical.
The calendar of macroeconomic events will be completely empty on Wednesday. A relatively important report on retail sales will be released in America, which promises to be better than the previous month. However, given how the markets are now reacting even to fairly important reports, one does not have to wait for a clear and logical development of this report. We believe that traders will work it out only if the real value differs greatly from the forecast.
We have two trading ideas for February 17:
1) Buyers have released the initiative and the price has settled below the trend line. Thus, we recommend observing the pair's movement for at least a day and not rush into opening new positions. The pair's movements from yesterday were completely illogical and impossible to predict. Perhaps such movements will persist in the market for several days.
2) Bears managed to gain a foothold below the trend line, but there is a feeling that the downward movement will not continue. Thus, short positions that were opened upon a signal to break the trend line can be left open with the goal of the extremum level at 1.2058, but also set Stop Loss above the critical line (1.2126). 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.
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