EUR/USD: plan for the European session on January 11. COT reports (analysis of yesterday's deals). Euro drops, but too early

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

Weak fundamental reports on the European economy from last Friday became the reason why short positions in the euro had increased, and everything that happens in the US, associated with the confirmation of Joe Biden as president, only raised the demand for the US dollar at the beginning of 2021. Most likely, the tendency for the euro to weaken will continue further, but is unlikely to be medium-term.

But before talking about further prospects for the pair's movement, let's see what was happening in the futures market and how the Commitment of Traders (COT) positions changed. Judging by the presented graph, the report has not changed much compared to last year. There was an increase in both long and short positions In the COT report for January 5. Buyers of risky assets continue to believe in a bullish trend despite the euro's decline earlier this year, which will make it possible for new major players to enter the market. News on the ongoing vaccinations against the first strain of coronavirus in Europe will also support euro buyers. Pressure on the euro will come from isolation measures and quarantines in several European countries. Thus, long non-commercial positions rose from 222,443 to 224,832, while short non-commercial positions jumped from 78,541 to 81,841. Due to the larger increase in short positions, the total non-commercial net position decreased from 143,902 to 142,991 weeks earlier. The insignificant change in the delta at the beginning of the year is unlikely to indicate a change in the tactics of euro buyers, who count on bringing back the single currency's growth after the abolition of quarantine measures in the EU countries.

Now for the pair's technical picture. Large buyers will focus on protecting support at 1.2174, which was updated during the Asian session. Forming a false breakout there will lead to creating a signal to open long positions in the euro. However, given the lack of important fundamental reports and low trading volume, one can not count on serious activity in the 1.2174 area. In the absence of any action at this level, I recommend postponing long positions until a larger low in the 1.2130 area has been updated, or buy EUR/USD immediately after rebounding from a low of 1.2083, counting on a correction of 20-25 points within the day. The 1.2083 level is a very important support, a breakout of which could seriously increase the pressure on the euro. We can say that buyers have managed to stop the downward correction only when the pair has settled above resistance at 1.2224. Testing this level from top to bottom creates an additional signal to open long positions in euros with the main goal of updating highs of 1.2281 and 1.2315, which is where I recommend taking profits.

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

The initial task of the sellers is to protect resistance at 1.2224, slightly above which the moving averages pass, playing on the side of the bear market. Forming a false breakout there will lead to creating a new downward correction, and its goal is for the quote to surpass support at 1.2174, which is currently being traded. The lower border of the current downward price channel also passes in this area. Getting the pair to settle below this range and testing it from the bottom up will open a direct road to a low of 1.2130, where I recommend taking profits. The succeeding target will still be 1.2083, which will become the defining one in the current downward momentum. Having no fundamental reports for the day will also affect the trading volume, so volatility can be quite unpredictable. If the bulls find the strength and manage to surpass resistance at 1.2224, I recommend not to rush to sell. The optimal scenario would be a test of the 1.2281 high, from where you can sell EUR/USD immediately on a rebound, counting on the pair's correction down by 20-25 points.

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Indicator signals:

Moving averages

Trading is carried out below 30 and 50 moving averages, which indicates that sellers of the euro are in control of the market.

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

If the euro grows, the average border of the indicator in the 1.2224 area will act as resistance. You can sell EUR/USD on a rebound from the upper border in the 1.2281 area.

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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