Analysis EUR/USD 5M

The EUR/USD currency pair continued its upward movement on Tuesday, with the rally intensifying sharply throughout the day. We cannot say that any extra-important information became available to traders yesterday. Rather, the market realised the full danger of Donald Trump's new tariffs against the European Union. First, traders may have understood that Trump's intentions to seize Greenland are not a bluff or empty threats. Second, the new trade tariffs against the EU effectively nullify the 2025 trade deal. Third, this time Europe may respond not half-heartedly but proportionately, because it is now clear to everyone — don't play with Trump, he will bite off more than a finger. If Europe keeps jumping to please Washington, soon not only Greenland but a couple of other countries may be at stake.

The market, which spent most of last year pricing in the trade war organised by Trump, began the new year the same way — by selling the dollar. These sales are entirely logical, and the weak fundamentals for the dollar are not limited to the new tariffs. True, the daily TF is still flat, but the hourly TF has broken the downtrend. That means the price can soon return to the 1.1800–1.1830 area. A sideways channel cannot hold the price inside it forever.

On the 5-minute TF several very attractive signals were formed yesterday. As soon as the pair showed good volatility, profit followed — and decent profit at that. The first buy signal was formed at the very start of the European session, so traders could easily capitalise on it. Price broke the 1.1657–1.1666 area and later the Senkou Span B line. The target area of 1.1750–1.1760 was reached without difficulty, and the rebound from it was unambiguous. One buy trade yielded about 70–80 pips.

COT Report

The latest COT report is dated January 13. The illustration above clearly shows that the net position of non-commercial traders remains bullish. Since Trump took office for the second time, only the dollar has been falling. We cannot say the dollar's decline will continue with 100% probability, but current global developments suggest this scenario. The red and blue lines are diverging, indicating strong bull dominance.

We still do not see any fundamental factors that would strengthen the euro, while there are plenty that would weaken the dollar. The global downtrend still persists, but what does it matter now, given that the price moved over the last 17 years? Over the past three years, only the euro has been rising, and that trend is too.

The positioning of the indicator's red and blue lines continues to indicate preservation and strengthening of the bullish trend. During the last reporting week, the number of longs in the "Non-commercial" group decreased by 14,600, while shorts increased by 15,500. Accordingly, the net position fell by 30,100 contracts over the week.

Analysis EUR/USD 1H

On the hourly timeframe, EUR/USD broke the downtrend and began a rapid rise. The descending trendline has been overcome. In the near term, the euro may return to the upper line of the 1.1400–1.1830 sideways channel and, we hope, break out of this cursed area this time. The fundamental and macroeconomic backdrop continues to support a non-dollar bias.

For January 21, we highlight the following levels for trading: 1.1234, 1.1274, 1.1362, 1.1426, 1.1542, 1.1604–1.1615, 1.1657–1.1666, 1.1750–1.1760, 1.1846–1.1857, 1.1922, 1.1971–1.1988, as well as the Senkou Span B (1.1692) and Kijun-sen (1.1673) lines. Ichimoku lines may move during the day, which should be taken into account when determining trading signals. Don't forget to move your Stop Loss to breakeven if the price has moved 15 pips in the right direction — this will protect against potential losses if the signal turns out to be false.

On Wednesday, there are no major events scheduled in the EU or the US, except for remarks by Christine Lagarde. Lagarde may again comment on Trump's geopolitical ambitions in the Arctic and on possible EU countermeasures to US tariffs.

Trading recommendations:

On Wednesday, traders can trade from the 1.1750–1.1760 area. A rebound from this area will allow opening short positions with a target of 1.1692. A break above the 1.1750–1.1760 area will make longs relevant with targets of 1.1800–1.1830.

Explanations of the illustrations:

• Price support and resistance levels (resistance/support) — thick red lines near which movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines — Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour. They are strong lines.
• Extremum levels — thin red lines from which the price previously bounced. They are sources of trading signals.
• Yellow lines — trend lines, trend channels, and any other technical patterns.
• Indicator 1 on the COT charts — the size of the net position of each trader category.