EUR/USD 1H
The euro/dollar pair continued the upward movement that had begun on Friday. However, the downward trend still persists even if the price was increasing for three days, which was signaled by the downward trend line. Yesterday, the pair worked it out, but could not overcome it on the first try. So now a pullback to the downside may follow, afterwards the strength of this line will be tested for the second time, which may be successful. In any case, we believe that the downward trend will still be present until the trendline is broken. Although, for example, everything speaks in favor of the beginning of a new round of an upward trend on higher timeframes. In our last review, we recommended trading bullish only if the price settles above the trend line. This did not happen over the past trading day, so longs should not have been opened. We recommended opening short positions when the price bounces off the trend line, the 1.2058 level, or when the price settles below the Kijun-sen. As a result, the price rebounded off the trend line and the 1.2111 level, which in general gave a good sell signal in terms of strength. Thus, in this case, traders could open sell orders with targets at the 1.2058 level and the Kijun-sen line. Stop Loss order can be placed above the trend line in case the upward movement continues without a correction.
EUR/USD 15M
Both linear regression channels are directed to the upside on the 15-minute timeframe. The 1.2058 level, which we mentioned yesterday, was overcome, so the upward movement continued. At the moment, we see a clear price rebound from the 1.2111 level, there was no false breakout of this level. Therefore, we now have a fairly strong sell signal, but it will probably be canceled when the quotes return to the level of 1.2111.
COT report
The EUR/USD pair fell by 80 points during the last reporting week (January 26 - February 1). Therefore, we can expect professional traders to slightly reduce their demand for the euro, since the dollar has been rising for four consecutive weeks. However, the new Commitment of Traders (COT) report was a real surprise, which needs to fit into the overall picture of things for the euro/dollar pair. During the reporting week, the most important group of non-commercial traders opened almost 11,000 sell contracts (shorts) and closed (!!!) 23,000 buy contracts (longs). Considering that we concluded that the upward trend is likely to continue, this behavior of major players does not fit with it at all. However, as we have already said, any assumption or hypothesis must be confirmed by technical factors and signals. Therefore, for now, these are just numbers. Figures indicate a 34,000 decline in the net position of non-commercial traders. This means that they have significantly become more bearish. But does this mean that the euro will continue to fall? Is demand falling in parallel for the US dollar, which is not included in the COT reports? We believe that this is exactly the case when the report data needs to be compared with the technical picture. For example, a rebound has occurred on the 24-hour timeframe from the Senkou Span B line and the 50.0% Fibonacci level. Thus, there are high chances of growth for the pair, and the COT report contradicts this, so we do not take it into account for now. But if the Senkou Span B line is crossed, then the data of the technique and the COT reports will coincide and a new long-term downward trend can be expected.
European Central Bank President Christine Lagarde will give another speech on Wednesday. In addition, we can also expect speeches from Federal Reserve Chairman Jerome Powell, as well as Bank of England Governor Andrew Bailey on this day. Most likely, these will be speeches at various offline webinars, lectures, forums, etc. It is unlikely that at such events the heads of central banks will share really important information with the audience. Thus, one should not lose sight of these events, but expect a lot from them, too.
We have two trading ideas for February 10:
1) Buyers still do not have the initiative since the price is still below the trend line. Thus, we recommend buying the pair if the price settles above the downward trend line with targets at the resistance levels of 1.2139 and 1.2158. Take Profit in these cases can be up to 50 points. The consolidation can happen today.
2) Bears continue to keep the initiative in their hands, but in recent days they feel bad and may lose it. For now, we continue to recommend trading bearish with targets at the support level 1.2058 and the Kijun-sen line (1.2033), since a rebound has occurred from the trend line. Take Profit in this case can be up to 60 points. If the trend line is broken, it will reverse the downward trend and the relevance of short positions. Stop Loss can be placed above the trend line.
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.
