EUR/USD 5M
The EUR/USD pair traded in a rather dull manner again on Tuesday. At least this is exactly how it looks on the 5-minute timeframe. As usual, the movement was almost sideways during the evening, but a fairly confident upward movement began as soon as the European session opened. Basically, a round of upward correction was brewing after the EUR/USD pair had gone down 350 points in total for a week and a half. Unfortunately, traders had very few levels and supports/resistances at their disposal on Tuesday. The price did not meet a single one on its way. Therefore, neither a buy signal nor a sell signal was formed yesterday. Also, the market did not react to any of the macroeconomic reports. The time of its release is marked with the number "1" in the chart. A report on GDP in the European Union for the fourth quarter was released during this time and, as we can see, the upward movement, which began with the opening of the London Stock Exchange, stopped. Thus, we can conclude that traders either ignored this report, or perceived it negatively. The report could be interpreted in different ways, as compared to the first estimate, it worsened if you look at the annual expression, and improved if you look at the quarterly expression. After the markets learned about the change in the EU GDP, the buyers tried to push the EUR/USD pair to the upside, but failed and so the pair practically spent the rest of the time in a horizontal channel. At the moment, the upward trend in the most short-term plan persists, which is signaled by both linear regression channels directed upward.
EUR/USD 1H
On the hourly timeframe, we can make sure that there really was not a single obstacle in the path of the pair's movement on Tuesday. The downward trend is maintained thanks to the downward trend line, which is why the bears still have the initiative. However, as we have mentioned in previous articles, the outlook for the US currency does not look very convincing now, as well as the overall outlook for the dollar for 2021. Thus, we expect a breakdown of the downward trend in the near future and an upward movement of the pair within a week or two. At the same time, to implement such a scenario, the bulls need to overcome the trend line and the Kijun-sen line. The US will publish its February inflation report on Wednesday. Almost all participants in all markets, as well as the Federal Reserve, are now looking at US inflation. Everyone expects the CPI to accelerate. Therefore, if inflation accelerates from the current 1.4% to the projected 1.7% y/y, this may support the dollar. However, do not forget that the markets continue to often ignore important macroeconomic reports. In general, we continue to trade, as before - along important levels and lines. Do not forget to set Stop Loss to breakeven when passing 15-20 points in the right direction.
COT report
Recall that the EUR/USD pair fell by 110 points during the last reporting week (February 23 -March 1). In the last couple of months, we have supported the option of the continuation of the global uptrend, and this scenario was partly confirmed by the COT reports. However, we would like to remind you that either a strong correction or a new downward trend has been brewing since September 2020. This conclusion is solely based on the COT reports. Everything is simple: the green and red lines of the first indicator in the chart, which represent the net positions of the "non-commercial" and "commercial" groups of traders, reached the point of maximum divergence back in September. Such points are considered either points of the end of the trend, or harbingers of its completion. If these lines begin to move towards each other, it means that the mood of non-commercial and commercial traders is changing to the opposite, and the trend along with them. However, the pandemic and the crisis, as well as the unprecedented actions of the central banks, which caused the strongest growth in 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 this time, starting in September, the big players, as they say, walked along the edge of the abyss. The green and red lines slightly narrowed, then diverged again, that is, this signal began to have a delayed execution. Therefore, solely from the COT reports, we can say that now is an excellent time to continue forming a new downward trend. Moreover, professional traders closed 8,000 buy contracts and opened 8,000 sell contracts during the reporting week. Thus, their net position decreased by 16,000, that is, their mood became more bearish.
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.
