M5 chart of EUR/USD
EUR/USD did not show any particularly interesting movements on Monday. The pair was rising at night, falling at the European trading session, staying flat at the US one. The only event that was interesting was a formal one. The new speech of European Central Bank President Christine Lagarde, who will speak five times in two weeks, did not provide any new information. Lagarde basically said everything she could last week. She made it clear that the ECB's monetary approach will not be adjusted in the coming months, the rate will continue to rise at 0.5% for at least two more meetings. So there was nothing for traders to react to. Not many interesting events this week, but it absolutely does not mean that the price will stand in one place. We should wait for the Federal Reserve and ECB meetings, which will take place next week. Thus, for the time being, technique is top priority.
There were no signals on Monday. During the US trading session, the pair fell to 1.0868 and the critical line, which together formed a support area. However, EUR did not rebound or cross this mark so there were no signals.
COT report
The COT reports for the euro in the last few months have been fully consistent with what is happening in the market. You can clearly see on the chart that the net position of big players (the second indicator) has been growing since early September. Around the same time, the euro started to grow. At this time, the net position of the non-commercial traders has been bullish and strengthens almost every week, but it is a rather high value that allows us to assume that the uptrend will end soon. Notably, the green and red lines of the first indicator have moved far apart from each other, which often precedes the end of the trend. During the given period, the number of long positions held by non-commercial traders decreased by 10,300, whereas the number of short positions fell by 2,300. Thus, the net positions decreased by 8,000. Now the number of long positions is higher than the number of short positions opened by non-commercial traders by 127,000. From a technical perspective, a bearish correction should have started a long time ago. In my opinion, this process can not continue for another 2 or 3 months. Even the net position indicator shows that we need to "unload" a bit, that is, to correct. The overall number of short orders exceeds the number of long orders by 52,000 (711,000 vs. 659,000).
H1 chart of EUR/USD
EUR/USD maintains a bullish sentiment on the one-hour chart, staying above the lines of the Ichimoku indicator. Thus, the upward movement may persist in the near future, despite last week's flat. As we can see, there is still no way for the euro to correct, and traders prefer to buy the pair or not to do anything at all. On Tuesday, the pair may trade at the following levels: 1.0658-1.0669, 1.0736, 1.0806, 1.0868, 1.0938, 1.1036, 1.1137 and also Senkou Span B lines (1.0679) and Kijun Sen (1.0845). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. On January 24, Lagarde will deliver a speech in the EU, but the market has already shown that it already has all the necessary information and is not ready to work out all of Lagarde's speech. Traders will pay more attention to the indexes of business activity in the services and manufacturing sectors in the US and EU but those are not very important either. The market will only react to these reports if the results significantly deviate from the forecasts.
What we see on the trading charts:
Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT charts reflects the net position size of each category of traders.
Indicator 2 on the COT charts reflects the net position size for the non-commercial group.
