M5 chart of EUR/USD
EUR/USD continued trading with low volatility and mainly sideways on Monday. It showed a slight growth during the final days of 2022, but as a whole remained within the horizontal channel. And on Monday the technical picture didn't change at all. There are still very few fundamental events and macro data. For example, yesterday, the final purchasing manager's index for manufacturing in December was published in Germany. Naturally, it did not provoke any market reaction. More or less important data will be available closer to the end of the week and then we would expect more serious moves. But I warned you last week that the flat may take much longer than many expected. I wouldn't be surprised if it lasts another 2 or 3 weeks.
There was only one trading signal and it was very good. There's always a risk of false signals when facing a flat, so the less of them, the better. The pair rebounded from 1.0669 during the European session, but it failed to go up even 15 pips. Basically, in an hour after this signal was formed it was clear that there would be no movement on Monday, so the position could be closed manually with small profit.
COT report
The COT reports for the euro in the last few months have been fully consistent with what is happening in the market. You can clearly see on the chart that the net position of big players (the second indicator) has been growing since early September. Around the same time, the euro started to grow. At this time, the net position of the non-commercial traders has been bullish and strengthens almost every week, but it is a rather high value that allows us to assume that the upward movement will end soon. Notably, the green and red lines of the first indicator have moved far apart from each other, which often means the end of the trend. During the given period, non-commercial traders opened 2,700 long positions, whereas the number of short positions fell by 1,100. Thus, the net positions rose by 3,800. The number of long positions is 146,000 higher than the number of short positions opened by non-commercial traders. So the question now is how long will the big players increase their longs? Moreover, from a technical perspective, a bearish correction should have started a long time ago. In my opinion, this process can not continue for another 2 or 3 months. Even the net position indicator shows that we need to "unload" a bit, that is, to correct. The overall number of short orders exceeds the number of long orders by 41,000 (685,000 vs. 644,000).
H1 chart of EUR/USD
EUR/USD is still in a very high position on the one-hour chart, and is still in a flat. Lines of the Ichimoku indicator are very close to each other and have lost meaning. The pair can cross them easily and freely now because it's in a horizontal channel. Therefore, I can't say anything new about the technical picture at the moment. On Tuesday, the pair may trade at the following levels: 1.0340-1.0366, 1.0485, 1.0581, 1.0658-1.0669, 1.0736, 1.0806, as well as Senkou Span B (1.0654) and Kijun Sen (1.0660). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. On January 3, the US will release its manufacturing activity report for December (final value). I don't expect a significant reaction from the market. The flat will likely persist.
What we see on the trading charts:
Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT charts reflects the net position size of each category of traders.
Indicator 2 on the COT charts reflects the net position size for the non-commercial group.
