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The EUR/USD currency pair began to correct on Wednesday. Recall that on Tuesday evening, Donald Trump stated, without batting an eye, that a low dollar rate is a brilliant result for the American economy. According to the US president, exporters will feel much better and more competitive, and the American economy will say "thank you." Trump also added that he could manage the dollar rate himself, but refrains from doing so for now. Following such statements, the US currency fell to four-year lows against the euro.
On Wednesday, a correction began. The results of the FOMC meeting were announced yesterday evening, but it seems they did not interest anyone. At least, we do not associate the dollar's growth throughout the day with this event. The FOMC meeting will be studied and analyzed in detail today, as "chickens should be counted in the fall." When the meeting's results are published, the market often trades impulsively and emotionally, and there are already enough emotions in the market even without the FOMC. As soon as the pair left the sideways channel on the daily timeframe, volatility soared. Thus, there is no shortage of good movements right now. The main thing is not to incur losses on them.
On the 5-minute timeframe, two trading signals were formed yesterday. At the beginning of the European trading session, the pair bounced off the area of 1.1971-1.1988 but only moved up 25 pips, enough to at least set the Stop Loss to break even. During the American trading session, the price settled below the 1.1971-1.1988 range and worked down to 1.1922 by the end of the day. Thus, the sell trade yielded a small profit for traders. We do not consider the movements after the announcement of the FOMC meeting results for now.
The latest COT report is dated January 20. The illustration above clearly shows that the net position of non-commercial traders remains "bullish." Since Trump took office as President of the United States for the second time, only the dollar has been falling. We cannot say with 100% certainty that the decline of the American currency will continue, but current developments around the world hint at this possibility.
We still do not see any fundamental factors that would strengthen the European currency, while there are sufficient factors for the American dollar to fall. The global downward trend still persists, but what does it matter where the price has moved in the last 18 years? A new upward trend has been forming over the last three years, and in the coming weeks, the price may break the global downward trend line, confirming further long-term growth.
The positioning of the red and blue lines of the indicator continues to indicate the maintenance of a "bullish" trend. During the last reporting week, the number of longs in the "Non-commercial" group decreased by 8,400, while the number of shorts increased by 12,600. Accordingly, the net position decreased by 21,000 contracts over the week.
On the hourly timeframe, the EUR/USD pair continues to form an upward trend. The pair has officially left the sideways channel of 1.1400-1.1830, in which it spent seven months. Thus, in the near future, we still expect the European currency to continue growing. As we have said, the trade war will only escalate, and Trump will continue to use tariffs as his main tool to advance his own interests.
For January 29, we highlight the following levels for trading: 1.1362, 1.1426, 1.1542, 1.1604-1.1615, 1.1657-1.1666, 1.1750-1.1760, 1.1830-1.1837, 1.1922, 1.1971-1.1988, 1.2051, 1.2095, as well as Senkou Span B (1.1673) and Kijun-sen (1.1884) lines. The Ichimoku indicator lines may shift during the day, which should be taken into account when determining trading signals. Remember to set the Stop Loss order to breakeven once the price moves in the correct direction by 15 pips. This will protect against possible losses if the signal turns out to be false.
On Thursday, there are no interesting events or reports scheduled in either the European Union or the United States. Thus, traders will have to make trading decisions during the day based on technical factors. The correction may continue.
On Thursday, traders can trade from the 1.1922 level or the Kijun-sen (trend) line. New longs will become relevant upon a bounce from either of these supports, with targets at 1.1971-1.1988 and 1.2051. Short positions can be considered if the price settles below 1.1922, with targets at the Kijun-sen or the trend line on the hourly timeframe.
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