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EUR/USD – 1H.
Good afternoon everyone! On January 6, the EUR/USD fell to the ascending trend line. Yet, traders' sentiment on the pair is still bullish, albeit less strong. However, another rebound from this line helped the euro rise to the level of 1.2353. However, this growth also did not last long and now the pair is again heading for the trend line. Meanwhile, the results of the voting in the Georgia election have become known. Democrats John Ossoff and Raphael Warnock won the runoff election, bringing the total number of seats in the Senate to 50. Currently, Republicans have the same number of seats but the decisive vote in the event of a controversial situation will be the one of Kamala Harris, Vice President of the United States after the inauguration of Biden. Thus, the Democrats gained power on all three levels - the lower House of Congress, the Senate, and the White House. This is a devastating defeat of Donald Trump and all Republicans. Notably, political news from the US has overshadowed other news. Trading activity is sluggish after the holidays. So, it is likely to get back to normal next week. Yesterday, the minutes from the last Fed meeting were also published. However, investors ignored this event. The US currency is facing strong selling pressure possibly due to events related to Donald Trump in recent weeks, as well as the generally unstable political situation in America.
EUR/USD – 4H.
On the 4-hour chart, the pair grew to the correction level of 200.0% - 1.2353. The ascending trend line signals bullish bias. If the pair consolidates under the trend line, the US dollar may decline to the Fibonacci level of 161.8% - 1.2027. If the pair consolidates above the 200.0% level, the US dollar may approach the next level of 1.2501.
EUR/USD – Daily.
On the daily chart, the EUR/USD pair is up trying to hit the correction level of 423.6% - 1.2495. Until the moment when the pair makes consolidates under the level of 323.6%, there are still high chances of growth.
EUR/USD – Weekly.
On the weekly chart, the EUR/USD pair fixed above the narrowing triangle, which indicates the possibility of further growth of the pair in the long term.
Preview
On January 6, the ADP Nonfarm Employment Change was released in the United States. The reading was much worse than analysts' expectations. The Services PMI in the EU also turned out to be worse than envisaged. Only the Services PMI for the US did not disappoint traders.
Economic calendar for US and EU:
EU - Consumer Price Index (10:00 am GMT).
US - Initial claims for unemployment benefits (13-15 GMT).
US- The ISM Non-Manufacturing Index (15-00 GMT).
On January 7, the European Union will release an inflation report which is of great importance for traders. They will also focus their attention on the ISM index.
COT report (Commitments of traders):
The activity of large speculators in the last two weeks of 2020 was very low. According to the latest COT report of December 29, non-commercial investors closed 57 long trades and opened new 1,660 short trades. Therefore, market sentiment has once again become bearish. However, bulls do not give up and the overall sentiment remains bullish as the number of long traders is still higher (224,000 – 79,000). Thus, I can conclude that speculators are considering short deals on the euro but they are clearly waiting for the proper moment.
Forecast and recommendations for EUR/USD:
On Thursday, I recommend selling the euro in case of a rebound from the level of 1.2349 on the hourly chart with the goal of a trend line. Long deals on the pair can be opened with a target of 1.2349 when the pair rebounds from the trend line on the hourly chart.
TERMS:
"Non-commercial" - large market players: banks, hedge funds, investment funds, private, and large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy currency, not for speculative profit but to ensure current activity or export-import operations.
"Non-reportable positions" - small traders who do not have a significant impact on the price.
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