EUR/USD: plan for the European session on January 4. COT reports. Buyers have a chance for the euro to rise, but they need

To open long positions on EUR/USD, you need:

The euro's sharp decline at the end of 2020 was not very surprising, as was the fact that demand for the US dollar could return as early as 2021, although this phenomenon will be temporary. It is possible that trading volume and volatility will remain low early this week as the market rebounds from the New Year and Christmas holidays.

Buyers must regain control over the 1.2267 level, this will make it possible to count on renewed demand for the euro. A breakout and getting the pair to settle above this range along with being able to test it from top to bottom creates a good signal to open long positions. The main task is to update last year's high in the 1.2304 area, the breakdown of which will open a direct path to the area of 1.2339 and 1.2417, where I recommend taking profit. Today's data on activity in the manufacturing sector of the eurozone countries is unlikely to harm EUR/USD buyers, but if the downward correction persists, I recommend opening long positions after a false breakout in the support area of 1.2236. A larger level can be seen already in the 1.2205 area, and I recommend buying EUR/USD on a rebound from a low of 1.2174, counting on an upward correction of 20-25 points within the day.

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To open short positions on EUR/USD, you need:

Sellers of the euro aim to regain control of the 1.2236 level, which they missed in today's Asian session. Getting the pair to settle below this range and testing it from the other side will raise the pressure on the pair, which creates a good entry point for short positions. In this case, the main goal is to pull down EUR/USD to support at 1.2205, as well as to update a larger low around 1.2174, where I recommend taking profits. Testing this area will also indicate a continuation of the downward correction and a complete reversal of the upward trend in the euro. An equally important task for the bears is to protect resistance at 1.2267, slightly above which the moving averages are, playing on the side of the euro sellers. Weak data on December activity in the manufacturing sector of the euro countries will certainly put pressure on the euro. Forming a false breakout at 1.2267 will be a signal to open new short positions. In case the pair grows above 1.2267, it is better not to rush to sell, but wait for last year's highs in the area of 1.2304 and sell the euro there, counting on a downward correction of 25-30 points within the day.

Let me remind you that the Commitment of Traders (COT) report for December 21 recorded an increase in both short and long positions. Buyers of risky assets continue to believe in a bull market amid news that vaccination against the first strain of coronavirus has begun in Europe. However, there are still quite a few problems due to the quarantine measures taken after the detection of a new strain of Covid-19 that appeared recently in the UK. Thus, long non-commercial positions rose from 218,710 to 222,443, while short non-commercial positions jumped from 76,877 to 78,541. The total non-commercial net position rose from 141,833 to 143,902.

Indicator signals:

Moving averages

Trading is carried out below 30 and 50 moving averages, which indicates the continued likelihood of a downward correction in the euro at the beginning of this year.

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

In case the pair falls, support will be provided by the lower border of the indicator in the 1.2205 area. A breakout of the average border of the indicator in the 1.2267 area will cause the euro to rise.

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
  • MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
  • Long non-commercial positions represent the total long open position of non-commercial traders.
  • Short non-commercial positions represent the total short open position of non-commercial traders.
  • Total non-commercial net position is the difference between short and long positions of non-commercial traders.
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