EUR/USD - 24H.
The second week in a row ends with the collapse of the euro/dollar pair. At the end of last week, quite strong macroeconomic statistics were released in the United States, and the US Air Force attacked Syrian facilities, which immediately provoked an increase in "anti-risk" sentiment in the markets. But still, at the end of last week, the strengthening of the dollar looked rather doubtful. There was an impression that this is only a momentary confusion in the market, after which the planned fall of the US currency will resume. However, during this week, traders found more and more factors in favor of the US dollar. The current week ended with another fall of the pair, this time again due to strong macroeconomic statistics from overseas. Thus, in one week, the US currency broke the absolutely "bullish" trend for the euro/dollar pair. The 50.0% Fibonacci level, which we have been talking about in recent weeks, has been overcome. The price also left the Ichimoku cloud, so the chances of continuing to strengthen the dollar have increased dramatically. Something happened that few people expected. However, we always recommend our readers to support any fundamental theory or assumption with technical factors and specific signals. It should be remembered that this is a market and no one in the world can predict its behavior with a 100% probability, and also take into account all the factors that affect the exchange rate formation at the moment.
COT report.
During the last reporting week (February 23-March 1), the EUR/USD pair fell by 110 points. In the last couple of months, we supported the option of continuing the global upward trend, and COT reports partially confirmed this scenario. However, we would like to remind you that since September last year, either a strong correction for the euro/dollar pair or a new downward trend is brewing. This output is solely based on COT reports. It's simple: the green and red lines of the first indicator in the illustration, which show the net positions of the "Non-commercial" and "Commercial" groups of traders, reached the point of maximum divergence in September. Such points are considered either the endpoints of the trend or the harbingers of its end. If these lines begin to move towards each other, it means that the mood of non-commercial traders and commercial ones changes to the opposite, and with them the trend. However, the pandemic and the crisis, as well as the unprecedented actions of central banks, which caused the strongest growth of the money supply and, as a result, the imbalance between the money supply of various currencies, ultimately led to the fact that this phenomenon did not cause a trend reversal. However, all the time since September, the big players walked on the edge of the abyss. The green and red lines then narrowed slightly, then diverged again, that is, this signal began to have a delayed execution. Therefore, solely based on COT reports, we can say that now is an excellent time to continue forming a new downward trend. Moreover, during the reporting week, professional traders closed 8 thousand buy contracts and opened 8 thousand sell contracts. Thus, their net position decreased by 16 thousand, that is, their mood became more "bearish".
This week, there were many interesting fundamental and macroeconomic events. However, by and large, traders have been tracking only one factor all week – the growth factor in the yield of American treasuries, which for some reason began exactly a week ago to provoke a strong strengthening of the US currency. We have already drawn attention to the fact that the yield of treasuries has been growing for a long time, and the fact that the yield is growing indicates a low demand for government bonds and investors' fears about future inflation. Thus, these are more "bearish" factors for the US currency. However, the US dollar has been doing well in the last 7 trading days. And the markets do not think much about whether this is a bullish factor, an increase in government bond yields, or a bearish one. For the pound, over the past five months, there were few growth factors, however, the currency grew and became more expensive all this time. Thus, the bears may have reversed the long-term bullish trend. If so, even the factor of a new $ 2 trillion stimulus package for the US economy may not help the US currency. The general conclusion is that the foundation is still not on the side of the dollar, however, the technology is now on a downward trend. Thus, we work out a downward trend.
Trading plan for the week of March 8-12:
1) On the 24-hour timeframe, the whole technical picture is confused. The pair turned sharply down and started a strong downward movement, which raises some questions from a fundamental point of view. The pair's quotes were fixed below the Ichimoku cloud and below the 50.0% Fibonacci level. Therefore, theoretically, the pair's path to the south still has an important level of 61.8% on the Fibonacci – 1.1887. If it stops the bears, then a new round of upward movement can begin, which on the 4-hour and hourly timeframes will turn into the formation of an upward trend.
2) In fact, we can now conclude that a downward trend has begun. However, there are a lot of factors that can now influence the exchange rate formation of the euro/dollar pair, and many of them speak of opposite directions of movement. Thus, it is recommended to trade downwards now, using lower timeframes, because there is a clear trend. But it should be remembered that from a fundamental point of view, the probability of a new and strong fall in the US currency in 2021 is high.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced before.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
