EUR/USD - 24H.
After two weeks of almost a collapse of the euro/dollar pair, the bears finally took a break, which allowed the quotes to move slightly up. However, although we have repeatedly concluded that the US currency is very likely to weaken in 2021, it should be recognized that at the moment there is a clear downward trend. The pair's quotes, after failing to overcome the upper line of the Ichimoku cloud and the resistance level of 1.2225, began a strong downward movement. Fundamentally, this movement was justified by the growth in the yield of US government bonds. We are inclined to the option that before a new round of the upward trend, which will be triggered by a new 2 trillion "helicopter money" in the United States, traders decided to simply adjust the pair deeper, in particular, to buy it as cheap as possible. Thus, in technical terms, we are still looking in the direction of an upward trend. But at the same time, we would also like to remind you once again that any expectations and assumptions must be confirmed by specific technical signals. Without confirmation, all speculations about the future movement of the pair are just hypotheses. Fixing the price above the critical line will be the first signal for the formation of a new round of upward trends in the 24-hour timeframe.
COT report.
During the last reporting week (March 2-8), the EUR/USD pair fell by 200 points, which is quite a lot for it. However, in general, even taking into account such a fall, the upward trend is still visible. Thus, so far, it is still not necessary to talk about an unambiguous change in the trend to a downward one in the global plan. Recall that in recent weeks, the mood of major market players has become much more "bearish", as the total number of contracts for buying decreased by 20 thousand, and contracts for selling – increased by 30 thousand. If earlier there was a difference of three times between these figures, now it is two times with the advantage of the first. In other words, professional traders over the past 5 weeks have begun to believe less that the growth of the European currency will continue. As for the reporting week, the group of "Non-commercial" traders continued the trend of recent weeks. Major players closed 14,000 buy contracts and opened 12,000 sell contracts during this week. Thus, the net position for this group of traders increased by 26 thousand at once, and the mood of the group became much more "bearish". The latest COT reports speak almost unequivocally in favor of the fact that the market mood is changing to a downward one. The indicators also signal a very likely break in the previous trend, as the green and red lines of the first indicator continue to move towards each other. From our point of view, only one global factor can prevent this – it is the factor of new potential growth of the US money supply by $ 2 trillion.
This week, there were many interesting fundamental and macroeconomic events. Most of the time, market participants continued to track the yield of American treasuries, and only by the end of the week, interest in this indicator decreased. At the very beginning of the week, the eurozone published a GDP indicator that was slightly higher than the previous estimate, and in the middle of the week, the results of the next ECB meeting were summed up, during which it was decided to accelerate the purchase of assets from the open market under the PEPP program. There were no important speeches this week, but in general, the "foundation" and "macroeconomics" had a very indirect impact on the movement of the currency pair. We still cannot conclude that traders are now trading based on one or two factors that, as they say, lie on the surface. Take at least the factor of the yield of 10-year treasuries, which rose again on Friday and exceeded the previous high, amounting to 1.623%. The US dollar rose in price yesterday in the European trading session, and in the US – it was cheaper, although a couple of days ago, it grew in all trading sessions and the markets wonderfully explained this by the growth in the yield of treasuries. In general, now it is worth paying attention to all the factors and looking for technical confirmation of them.
Trading plan for the week of March 15-19:
1) On the 24-hour timeframe, the whole technical picture is confused. The pair could have started a new round of the upward trend from the 50.0% Fibonacci level that was reached a couple of weeks ago, but instead decided to complicate the correction trend that began earlier this year. Thus, formally, there is now just a downward trend, so it is recommended to consider buy orders not earlier than overcoming the critical Kijun-sen line. On the lower timeframes, it is allowed to consider the upward trends earlier.
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.
