Forex analysis review
Forex analysis review |
- Short-term analysis on LTC/USD for Sunday January 31, 2021
- Trading plan for GBP/USD for week of February 1 – 5. New COT report (Commitments of Traders). GBP trading firmly at 2.5-year
- Trading plan for EUR/USD for week February 1 – 5. New COT report (Commitments of Traders). USD in disgrace braced for new
| Short-term analysis on LTC/USD for Sunday January 31, 2021 Posted: 30 Jan 2021 02:06 PM PST LTC/USD is bouncing off important Fibonacci support. Price can very well have formed a higher low and is about to start for the next leg higher. Resistance remains important at $141 by the medium-term downward sloping trend line. Breaking above it will open the way for a move towards $160 and higher.
Green rectangle - support LTC/USD is bouncing off the 61.8% Fibonacci retracement. So far we observe price forming a higher low. If price breaks above $141-$143 we should raise the important support level from $118.50 to $127.60 Saturday's lows. Upside potential for LTC/USD is at $155-$170 area. If recent low at $127.60 fails to hold, we should expect price to test the important green rectangle support area. In the short-term a bullish bet with stops at $127.60 are favored as the upside potential provides good risk reward ratio. The material has been provided by InstaForex Company - www.instaforex.com |
| Posted: 30 Jan 2021 05:45 AM PST GBP/USD 4H. This trading week, GBP/USD has not made any higher highs but it has been holding firmly at near 2.5-year highs which is the level of 1.3758. Thus, the uptrend is still going on but the price is not logging higher highs. GBP/USD has been stuck in a 100-pips trading range. The question is open where it is going to move in the near time. On the one hand, it looks like the pair could tumble in the nearest days. If we look at a daily chart, we can clearly see that a non-stop upward move has been going on for 90 trading days that is longer than 3 months. Interestingly, the price hasn't made any downward correction or even a pullback. Thus, from the technical point, a downward correction is looming. The Ishimoku indicator's lines are of little importance now for analysis and forecasts because the indicator forms false signals in the flat market. Besides, a roller coaster turned into a moderate seesaw over the recent weeks. All in all, GBP/USD looks like the strangest currency pair now in terms of its dynamic. COT report In the week of January 19 – 25, GBP/USD rose by 80 pips. This is a modest growth, but the pair has been steadily advancing for a long time. A new COT report disappointed traders again. Let me remind you that over the recent 2-3 months, an absolute majority of reports has logged minor changes. At the same time, we cannot say that sentiment of large traders have been stable. The green and red lines of the first indicator, which display changes in net positions of Non-commercial and Commercial groups, clearly reveal frequent changes in market sentiment. These lines frequently reverse their trajectories. It means that large market players are wondering what to do with the pound sterling. Earlier, I told you that things depend on demand for both GBP and USD. That's what COT reports don't display. If hypothetically demand for GBP declines, but demand for USD also decreases at the same time, this will not lead to GBP weakness. This is what's happening over recent months. Professional traders are unable to state their preferences and rush to revise portfolios. Their sentiment cannot be termed stable bullish. Nevertheless, GBP is steadily moving up. In fact, it has appreciated 10 cents over the recent 3-4 months. In the reported week, traders opened 2,500 new long contracts on GBP/USD and 6,500 new short contracts. Therefore, the net position decreased by 4,000. Sentiment of non-commercial traders turned bearish. Remarkably, the sterling remains unaffected. It doesn't make sense to discuss the fundamental background for GBP/USD. This week, I gave you comparative analysis of the UK and the US economies after Q2 2020. We came to a conclusion that the US economy has recovered to a less degree because it had contracted to a larger degree. The British economy also got a punch in Q2. However, events of the latest 10 months confirm that traders don't attach great importance to that. Amazingly, market participants take little notice of grave factors like Brexit, a slump in the UK economy in Q2 and Q4, a challenge of the Bank of England about negative interest rates, soaring coronavirus daily rates, new mutant strain, three lockdowns one of which is still going on. As for the euro, it corrected downwards in the early 2021. Unlike EUR, the pound sterling hasn't done it yet. Thus, the sterling had been following an illogical, non-retraceable, and unreasonable upward trajectory which can persist indefinitely. One of the reasons behind this move could be the fact that $4 trillion has been pumped into the US economy. Such a steady advance is termed speculative growth. At present, I'm poised for the scenario about the sterling's fall which could be steep and unexpected. What I mean to say is that you should ignore placing stop loss levels when trading upwards. Trading plan for week February 1 – 5: 1)The currency pair doesn't have any obstacles to retain the upward trajectory. Thus, according to a 4-hour chart, upward targets for GBP/USD are seen at 1.3776 and 1.3874. Meanwhile, the pair is trading in the flat market. So, it would be better to trade using junior time frames where you can promptly monitor changes in trading sentiment. Please be aware that the sterling could plunge anytime soon. 2)Meanwhile, sellers are quite weak. Recently, they lack strength even to form a downward correction. Hence, according to 4-hour and 24-hour timeframes, it is out of the question to plan trading downwards. However, it is possible to consider trading downwards in a 1-hour chart when a downward move is underway. Notes for the pictures The resistance/support levels are the target levels when opening long/short positions. You can place take profit levels next to them. Indicators Ishimoku, Bollinger bands, MACD Areas of support and resistance are the ones from where the price has rebounded or has been rejected a few times. Indicator 1 in the COT charts is a size of net positions for each category of traders. Indicator 2 in the COT charts is a size of net positions for the non-commercial group. The material has been provided by InstaForex Company - www.instaforex.com |
| Posted: 30 Jan 2021 04:11 AM PST EUR/USD 4H. Last trading week, EUR/USD climbed a few dozens of pips. But this is not the most important. The thing is that a promising bearish trend which originated in 2021 can complete in the nearest time or perhaps has been already over. Having declined to 1.2060, the pair made another attempt to break it, though without any success. Moreover, at the second attempt, EUR/USD failed even to reach it. The bears were trying to approach this level for two days and each time was a failure. I spotted candlesticks with very long shadows on January 27 – 28. This means that the bears were exhausted to repeat the test of 1.2060. If so, either the downtrend is over or it needs serious fundamental factors to continue. From the technical point, the pair seems to have completed a downward correction after 2-3 months of the uptrend. Now the pair is likely to get ready for a new round of the uptrend. I assume it is premature to give up on the US dollar. Nevertheless, the fact is that the US currency is extending a losing streak. COT report For the trading week of January 19 – 15, EUR/USD rose by 60 pips. Thus, the outlook for the long-term uptrend is still valid. So, it can resume anytime. The COT report mirrors trading sentiment of large market players. The recent report does not reveal waning interest in the single European currency. On the contrary, two weeks ago the COT report logged a sharp increase of the bullish sentiment among non-commercial traders. In that week, they opened 8,000 more long contracts. The latest COT report which was released overnight again did not show great changes with the overall bullish sentiment. This time, non-commercial traders opened 3,300 long contracts on EUR/USD and closed 1,200 short contracts. All in all, the net positions for professional traders surged by 4,500. Not too many, but not too few. In essence, such figures do now allow analysts to affirm that the uptrend is over. Of course, it does not mean that EUR is unlikely to fall until large market players trim the number of buy contracts. Judging by the COT report, we cannot make a conclusion about a completion of the uptrend. The US dollar came under spotlight for the whole trading week. Just a few events happened last week, but some of them were crucial for the US dollar. Unfortunately, none of them supported the greenback. For your reference, some analysts reckon that the severe downturn in the US economy in Q2 2020 is to blame for protracted USD weakness over the last 10 months. Another reason is massive cash injections into the US economy. Hence, if these suggestions are right, a new round of cash injections will trigger another decline of the greenback. Such prospects are around the corner. Indeed, Congress will hardly approve the stimulus package worth $1.9 trillion proposed by Joe Biden. To sum up, in addition to the financial aid of $4 trillion in 2020 allocated in 2020, the government will provide a relief package of nearly $2 trillion this year. This will erase 5-6 cents of the US dollar against the euro. Apart from Joe Biden and Congress, the greenback was hurt by Treasury Secretary Janet Yellen. She stated that the US would not try to impact on the US dollars' forex rate. Besides, Federal Reserve Chair Jerome Powell sounded pessimistic at the press conference unveiling the policy update of the latest policy meeting. The final nail in the coffin came from the US GDP report. The actual figure undershot the expected score. The US national output expanded 4.0% in Q4 2020. On the one hand, it is a decent growth, but on the flip side, the reading was worse than expected. Bearing in mind a sharp contraction in Q2 2020, the US economy is still far below the pre-pandemic levels. That's what Jerome Powell told about on Wednesday. Last but not least, the coronavirus pandemic is still raging across the world. Trading plan for week February 1 – 5: 1)This week, EUR/USD make attempts to carry on with the downtrend. However, all efforts were in vain. At the end of the trading week, the pair was trapped in a narrow range, so the market looked like flat. All lines of the Ishimoku indicator are close to each other. Thus, they don't have enough power and we cannot trade the pair with its help. Beginners are recommended to trade from 1.2060 considering Bollinger bands. If this level is not surpassed and Bollinger bands could reverse upwards, this will mean a strong likelihood of the new uptrend with the first upwards targets at resistance of 1.2223 and 1.2274. 2)The downtrend seems to have begun but it did not last for long. While the price is above 1.2060, we cannot speak about a new round of the downtrend. If the price manages to breach it, we will be able to trade downwards with the downward target at support of 1.2002. Make sure you trade cautiously as the US dollar finds it hard to gain ground. Notes for the pictures The resistance/support levels are the target levels when opening long/short positions. You can place take profit levels next to them. Indicators Ishimoku, Bollinger bands, MACD Areas of support and resistance are the ones from where the price has rebounded or has been rejected a few times. Indicator 1 in the COT charts is a size of net positions for each category of traders. Indicator 2 in the COT charts is a size of net positions for the non-commercial group. The material has been provided by InstaForex Company - www.instaforex.com |
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