EUR/USD 5-Minute Analysis

On Monday, the EUR/USD pair experienced a slight correction before resuming its upward movement. The only scheduled event for the day was a speech by Christine Lagarde. Although she spoke three times the previous week, none of her statements provided any significant new information. We previously noted that the most critical announcements were likely reserved for the European Central Bank meeting, which is set to conclude this Thursday. Thus, we did not anticipate anything particularly noteworthy from Lagarde's speech on Monday.

Nonetheless, market participants found fresh motivations to buy the pair throughout the day. Perhaps Donald Trump's recent actions, including imposing and lifting sanctions on Colombia within a day, influenced the market. Alternatively, traders may have been bracing for unpredictable outcomes from the current U.S. president. It could also be simply a continuation of the technical correction we mentioned a month ago on the daily timeframe. Even with three weeks of euro growth, the pair can continue its upward trajectory, given that it had previously declined for three consecutive months. The ascending trendline remains significant, and as long as the price does not consolidate below it, there is no reason to expect a new downward trend.

On the 5-minute timeframe, Monday's trading signals were nearly flawless. First, the price bounced off the 1.0461 level with precision, then reached the nearest target at 1.0524, rebounding sharply from that point. This created opportunities for traders to open long positions initially and then short positions. The long trade yielded about 40 pips in profit, while the short trade added another 20 pips. For a typically quiet Monday, these results were excellent.

COT Report

The latest Commitments of Traders (COT) report, dated January 21, shows that the net position of non-commercial traders has remained bullish for quite some time. However, bears have now taken the lead. Two months ago, there was a significant increase in the number of short positions held by professional traders, causing the net position to turn negative for the first time in a long while. This indicates that the European currency is now being sold more frequently than it is being bought.

We do not see any fundamental factors that would strengthen the European currency. The recent growth of the euro on the weekly timeframe appears to be a simple retracement. While the pair may experience a correction for a few more weeks, the long-term downward trend that has persisted for 16 years is unlikely to be reversed.

At this time, the red and blue lines have crossed, indicating a bearish trend in the market. During the last reporting week, the number of long positions in the "Non-commercial" category increased by 4,900, while the number of short positions rose by 6,900. As a result, the net position decreased by another 2,000 contracts.

EUR/USD 1-Hour Analysis

On the hourly timeframe, the currency pair is continuing its upward corrective trend. We maintain the view that a broader decline is inevitable in the medium term. The Federal Reserve is expected to cut interest rates only 1–2 times in 2025, which represents a more hawkish stance than the market initially anticipated. This, among other factors, should support the U.S. dollar moving forward. The end of the technical correction can likely be identified when the price consolidates below the Ichimoku indicator lines and the trendline.

On January 28, we highlight the following levels for trading: 1.0124, 1.0195, 1.0269, 1.0340-1.0366, 1.0461, 1.0524, 1.0585, 1.0658-1.0669, 1.0757, 1.0797, and 1.0843, as well as the Senkou Span B (1.0308) and Kijun-sen (1.0438) levels. Please note that the Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals. Remember to place a Stop Loss order at breakeven if the price moves 15 pips in the right direction, as this will help protect against potential losses if the signal turns out to be false.

On Tuesday, the Eurozone will hear another speech from Christine Lagarde; however, we do not expect any substantial updates. In the U.S., a key report on durable goods orders will be released, which could provoke a market reaction. However, the market currently appears to be in a corrective mode, so we do not anticipate a strong rally for the dollar.

Illustration Explanations:

• Support and Resistance Levels (thick red lines): Thick red lines indicate where movement may come to an end. Please note that these lines are not sources of trading signals.
• Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. These are strong lines.
• Extreme Levels (thin red lines): Thin red lines where the price has previously bounced. These serve as sources of trading signals.
• Yellow Lines: Trendlines, trend channels, or any other technical patterns.
• Indicator 1 on COT Charts: Represents the net position size for each category of traders.