EUR/USD - 24H.
The EUR/USD currency pair continued its upward movement over the past week. Although the volatility during the week was low, however, the upward movement was very stable and the pair managed to grow by 90 points. Thus, our forecast regarding the resumption of the global upward trend continues to be fulfilled. Recall that we consider the downward movement in 2021 a correction against the upward trend of 2020. The illustration clearly shows that the pair corrected by 76.4% against the last round of the upward trend and by almost 38.2% against the entire upward trend. Thus, if our hypothesis is correct, then this is quite enough to resume the upward trend. In principle, the upward movement in the last two weeks can not be called provoked by any new factors. There hasn't been any new fundamental background in recent weeks. All the global factors that previously influenced the movement of the pair remained the same. So, we still believe that the US dollar will resume depreciation in 2021, as the US economy continues to pump trillions of dollars, and inflation has already jumped up in the States. We can see that buyers easily managed to overcome the critical line and approach the Ichimoku cloud. Overcoming the cloud will open a further path to the top, towards the renewal of the highs for the last 2.5-3 years.
COT report.
During the last reporting week (April 6-12), the EUR/USD pair increased by 100 points. Recall that in the last 6 weeks, professional traders have been actively reducing buy contracts and increasing sell contracts, however, the total number of contracts to buy from a group of "Non-commercial" traders remains twice as large as the number of contracts to sell. This suggests that the mood among non-profit traders remains "bullish". The new COT report showed minimal changes. During the reporting week, major players opened 2.2 thousand buy contracts and closed 2.2 thousand sell contracts. Thus, the net position increased by 4.4 thousand, that is, the mood of the major players became more "bullish". We said earlier that the COT reports suggested the end of the upward trend in September last year. However, since then, the upward trend has continued smoothly, and now it can resume. So it turns out all because of the same factor of pumping the American economy with money. Let's ask ourselves: what exactly do COT reports display? They reflect the actions of the currency market whales, those players who make most of the transactions in the currency market, that is, move it. However, COT reports do not take into account such a factor as inflating the money supply. It turns out a paradox: major players can sell off the European currency, however, it will still become more expensive in the end, as the number of dollars in the economy and the markets is growing. A banal logical chain: the supply increases – the price falls. Therefore, in the pandemic year, COT reports do not always accurately reflect what is happening in the market. However, they make it clear how the mood of professional players is changing.
The macroeconomic background this week was quite weak. By and large, the markets reacted only to the report on inflation in the US, which jumped to 2.6% in annual terms. The markets reacted by selling the dollar. However, given the two-week upward trend, the European currency would have risen in price even without this report, not in favor of the US currency. Fed and ECB head Jerome Powell and Christine Lagarde delivered speeches on Wednesday. However, they did not report anything interesting to the markets. Powell once again noted that the quantitative stimulus program will continue to be implemented until the economy fully recovers from the crisis. Christine Lagarde compared the European economy to a patient on two crutches. Crutches are fiscal and monetary incentives and the patient will not be able to stand on his feet without them. However, we have known all this for a long time. The European economy is in poor shape, barely recovering, and will at best begin to recover by the summer. The US economy is recovering rapidly and may be the first in the world to enter the pre-pandemic economic growth curve. However, all these factors would be important for the euro and the dollar, if the factor of pouring trillions of dollars into the American economy did not overlap them. If it was a normally quiet time, the dollar would most likely show strong growth. However, the injection of exorbitant amounts into the US economy has the opposite effect.
Trading plan for the week of April 19-23:
1) On a 24-hour timeframe, the trend changes to an upward trend. The price has come close to the 20th level. Now buyers need to overcome the Ichimoku cloud and 1.2000. The nearest target is the Senkou Span B line (1.2091), from which a rebound and a small correction may follow, as the pair has been moving up almost continuously for more than two weeks. But we continue to look forward to further growth in the coming months.
2) The downward trend has been temporarily reversed. We still believe that the US dollar does not have the support of global fundamentals, so it will not continue to grow in 2021. However, we remind you that any fundamental theory must be supported by technical factors. Therefore, for the time being, it is not recommended to trade down, since the pair has gone above the critical line.
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.
