Trading plan for the EUR/USD pair for the week of December 14-18. New COT (Commitments of Traders) report. The ECB meeting



Over the past week, the EUR/USD pair has fallen by "as much as" 10 points. By and large, the price spent most of the week (the whole week) in a fairly narrow price range, which is especially clearly visible on the 24-hour timeframe. Thus, after the pair updated the highs of the year and reached 2.5-year peaks, even a downward correction did not begin. We have already encountered a similar situation. Just a couple of weeks ago, the pair was on a narrow side channel for four months. Then, the price first reached its annual highs, after which it simply traded in a 200-point side channel. Thus, we are not surprised at all at what is happening now with the pair. On the one hand, a downward correction has been brewing for a long time. On the other hand, the fundamental background has long implied a slight fall in the euro currency. On the other hand, market participants do not want to invest in the dollar and nothing can be done about it. Thus, at this time, the upward trend continues no matter what. We remind traders that any fundamental hypothesis must be supported by technical factors.

COT report.


During the last reporting week (December 1-7), the EUR/USD pair increased by 180 points, which is quite a lot for it. Well, the latest COT report for the same period for the third time in a row showed an increase in the net position of non-commercial traders. This means that the mood of professional market players is again becoming more "bullish", they are again looking towards buying the European currency. Although from the very beginning of September, they did nothing but reduce long positions in the euro. But the fact remains. So far, instead of completing the upward trend, we have received its resumption, which does not change anything in the current situation. During the reporting week, the "Non-commercial" group of traders opened 12,736 new buy contracts and closed 278 sell contracts. Thus, the net position increased by 13 thousand. Both indicators in the illustration have started to show an increase again, which signals the continuation of the upward movement. However, the green and red lines of the first indicator are still quite far from each other, which is a signal that the upward trend is about to end. The euro remains extremely overbought, its growth can best be described by the word "speculative". Thus, in any case, we are waiting for the end of the upward trend. And in any case, you need to wait for technical signals.

What can we say about the fundamental background of the past trading week? It was potentially quite important and significant. However, looking at the chart of the pair's movement over this period, can we say that the markets were actively trading the pair? Consequently, all news, reports, and publications were ignored again. We have long been used to ignoring macroeconomic statistics. But this week there were at least two major events that traders could expect to react to. The most important, of course, was the ECB meeting. Moreover, this time it was not a "passing" meeting, but with several decisions that affect monetary policy. Of course, the most important decision was to expand the emergency PEPP program by 500 billion euros and extend its validity by 9 months. In essence, this means new cash injections into the economy through the purchase of securities. That is, the ECB will turn on the printing press again and flood the economy with money to stimulate it. Thus, this factor itself is "bearish". First, the number of euros will increase, which will increase the supply of this currency in the foreign exchange market. Secondly, the measures taken by the ECB are "dovish", which is also a negative for the euro. However, the euro could not even correct down this week. Thus, everything remains the same as a week ago: there is a groundless upward trend, possibly supported exclusively by speculators (or major players, like the Central Bank, who make deals based on their reasons); we need to wait for technical signals about its completion.

Trading plan for the week of December 14-18:

1) The pair's quotes continue their upward movement and now, in the next few weeks, they will aim for the levels of 1.2245 and 1.2487. Although the COT report and the fundamental background continue to signal a possible and very likely fall in the pair's quotes and the baselessness of the current growth, it can continue. "Technique" now eloquently signals an upward trend after a four-month flat.

2) To be able to sell the EUR/USD pair, you need to at least wait for the price to consolidate below the Kijun-sen and Senkou Span B lines. However, we do not expect such a development in the near future, since the price is very far from these lines. Thus, short positions can only be considered on lower timeframes if a downward trend is formed there.

Explanation of the illustrations:

Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.

Ichimoku indicators, Bollinger bands, MACD.

Support and resistance areas – areas that the price has repeatedly bounced from before.

Indicator 1 on the COT charts – shows the net position size of each category of traders.

Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.

The material has been provided by InstaForex Company -