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27.01.2023 11:36 AM
EUR/USD: Technical analysis on January 27, 2023. American economy shows impressive growth

Hello, dear traders! Yesterday, EUR/USD reversed and fell to the 200.0% retracement level of 1.0869 in the 1-hour time frame. In case of a rebound from this level, the quote will return to 1.1000. Meanwhile, consolidation below 1.0869 will lead to a bearish continuation with the target at 1.0750.

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The pair's recent sluggish increase can hardly be called real growth. Bull traders run out of steam. They have dominated the market over the past months. So, they may soon begin to retreat. I expect a correction to occur in the next week or two. The ECB and the Fed will hold their policy meeting next week. In my view, trades have already priced the rate hikes of 0.50% and 0.25% respectively. Therefore, the price is likely to show the opposite reaction to the outcome of those meetings.

The greenback rarely grows now. Yesterday, for example, the Q4 GDP report in the US revealed a 2.9% increase, while traders had expected a 2.6% rise. Durable goods orders came in at 5.6%, beating market expectations of 2.4%. However, the greenback only gained 50 pips. In other words, the bears are now reluctantly selling the instrument. Perhaps they are waiting for the right moment. If after the Fed meeting and the ECB meeting, the pair does not go down, this will mean the greenback may be bearish for several months. The ascending trend corridor in the 4-hour time frame indicates bullish market sentiment.

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In the 4-hour time frame, the pair reversed to the upside. It is now heading toward the 50.0% retracement level of 1.0941. In case of a pullback from this mark, the quote will fall to the 38.2% Fibo level of 1.0610. The ascending trend corridor illustrates bullish market sentiment. The pair is unlikely to plunge before the close below the corridor. A bearish CCI divergence may trigger a drop in price in the coming days.

Commitments of Traders:

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Last week, speculators closed 10,344 long positions and opened 2,346 short positions. The sentiment of major players remains bullish. Speculators now hold 228,000 long positions and 101,000 short positions. EUR/USD is currently bullish, in line with the COT reports. At the same time, the number of longs twice exceeds the number of shorts. The pair has strong growth potential until the ECB raises interest rates by 0.50% at least.

Macroeconomic calendar:

Eurozone: President Lagarde's Speech (10-30 UTC).

United States: Core PCE Price Index (13-30 UTC); Personal Income and Personal Spending (13-30 UTC); Michigan Consumer Spending 15-00 UTC).

On January 27, fundamental factors will have little influence on market sentiment.

Outlook for EUR/USD:

It will become possible to sell the pair after a pullback from 1.0941 in the 4-hour time frame. Targets are seen at 1.0869 and 1.0750. Long positions could be opened if EUR/USD closes above 1.094 in the 4-hour time frame, targeting 1.1000 and 1150.

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