EUR/USD 5M
The euro/dollar pair traded calmly on the hourly timeframe on March 4 for most of the day, not reacting to macroeconomic events. But first things first. Traders were not active during the evening, as is often the case, and the pair moved along the support area of 1.2032-1.2042 all night. The bears were slightly active as the London Stock Exchange opened, and so they started to pull down the pair, which caused quotes to fall directly to the support area of 1.2032-1.2042, afterwards an outright flat began, which lasted until the middle of the US session. During this flat, the price settled below the 1.2032-1.2042 area several times, then above it. These places are marked with golden rectangles in the chart. However, it is clear that there was no clear rebound from this area, just as it did not clearly overcome it. Macroeconomic publications (marked with numbers 1 and 2 in the chart) also had no effect. Reports on the unemployment rate in the European Union and changes in the level of retail trade were generally weak, so one could expect the pair to continue falling. However, bulls and bears were still absent after such reports were published. The same goes for the US report on claims for unemployment benefits (figure 2). It was absolutely neutral, but there was no reaction to it either. One gets the impression that market participants were waiting for only one event throughout the day. And this is Federal Reserve Chairman Jerome Powell's speech. It is shown with the number 3 in the chart, and we see how the quotes sharply fell after it began, which at last could be worked out. One could clearly see it strengthening even at the beginning of the movement, which meant the market's reaction to the fundamental event. As a result, the bears managed to bring the pair to the first target level of 1.2008, and then to the second - 1.1952. Those who used this signal could earn 20 to 67 points of profit depending on where the short position was closed.
EUR/USD 1H
We can observe a more general picture of the state of affairs on the hourly timeframe. Yesterday, the bears managed, not without Powell's help, to continue the downward trend, which is supported by the corresponding trend line. The most interesting thing is that Powell did not mention anything encouraging for the dollar. Powell said that the soft monetary policy will remain until the labor market fully recovers. But at the same time, he also noted that the Fed intends to prevent inflation from rising above 2%, which is a hint at the use of other monetary policy instruments with a sharp rise in consumer prices. It was this thesis that could cause the dollar to sharply grow, since it means a possible tightening of monetary policy, but not at the expense of raising rates. Major reports like the Nonfarm Payrolls and Unemployment Rates are due in America on Friday. They should not be overlooked, as sharp price reversals and increased movement are possible. In regards to signals, you are advised to use rebounds from 1.1952 and 1.1944 as buy signals, as well as consolidation above these levels, if the price initially goes below them. You are advised to sell the pair in case these levels are clearly surpassed or after rebounding from them from below. We work for a clear rebound or if it overcomes them. The goal is always the closest one. In case we pass the direction we need, 15-20 points of Stop Loss can be rearranged to breakeven.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP/USD pair.
COT report
The EUR/USD pair rose by 30 points during the last reporting week (February 16-22). In recent weeks, we have pushed for a continuation of the long-term upward trend. This is partly supported by the latest Commitment of Traders (COT) reports. Over the past two weeks, the mood of large traders has not significantly changed, and when the report was released, the number of open long positions among professional traders exceeded the number of open short positions three times. Thus, on the face of a bullish mood. The latest COT report did not show any major changes either. A group of non-commercial traders opened 6,500 Buy-contracts (longs) and Sell-contracts (shorts) during the reporting week. Thus, the net position of this group of traders did not change in any way, and the mood did not become more bullish or more bearish. However, for the third week in a row, the first indicator in the chart has signaled the unchanged sentiment of non-commercial traders (who, we recall, are the engine of the foreign exchange market). The green and red lines did not rise or fall during these three weeks. Thus, the major players took a wait-and-see attitude, as it were. But the days when the pair collapsed (Thursday and Friday of this week) were not included in the new COT report. Thus, since the beginning of September last year, major players have been aiming for a downward trend, but global fundamental factors prevent them from starting it. We have already mentioned global fundamental factors more than once, it all boils down to a huge increase in the money supply in the United States in 2020.
Explanations for illustrations:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.
