EUR/USD - 24H.
The EUR/USD currency pair continued its upward movement over the past week. Although it is better to accurately indicate that the growth was observed only on Monday and Friday, and the pair was flat for the remaining three days. However, the growth within two days was enough to make the euro/dollar pair grow by 123 points in total, which is not so small, given the fact that there were practically no macroeconomic statistics and important events this week. A little later, we will look at the fundamental component in more detail. Here, we would like to note that everything is going according to the plan we talked about for the past months. In short, the pair was inside the upward trend for most of 2020. At the beginning of 2021, it was corrected for three months and now shows a readiness to resume the upward trend. Thus, we expect further growth of the European currency quotes, although there are no fundamental reasons for this. However, we have repeatedly talked about the "global fundamental factor" - the inflation of the US money supply - which leads to the fall of the dollar in the last year. The US authorities and the Federal Reserve continue to stimulate their economy with trillions of dollars. Thus, the dollar becomes more in the world and the markets. Naturally, according to market laws, the exchange rate falls. According to economic rules, inflation is growing, which we are seeing in the United States now. Thus, now the bulls have to overcome the Ichimoku cloud and then do not lose the initiative from their hands. Of course, a downward correction is possible in the coming weeks, as the pair has already grown by 400 points in total without a single pullback. However, it should not affect the trend.
COT report.
During the last reporting week (April 13-19), the EUR/USD pair increased by 120 points. Recall that since February, major players have been intensively reducing contracts for buying and opening contracts for selling. For the Non-commercial group, since the beginning of February, the total number of buy positions has decreased from 240 thousand to 190, and the number of sell positions has increased from 76 thousand to 127. Thus, there is a weakening of the "bullish" mood. However, it remains "bullish". In the last two weeks, it has started to strengthen again. Recall that the COT reports signal the end of the upward trend since last September when the lines of the first indicator were as far apart as possible. However, we still remind traders that the factor of pumping money into the American economy has not been canceled.
Simply put, large players can trade in any way. However, if the money supply of dollars increases in trillions, the influence of the players themselves on the foreign exchange market becomes smaller. Accordingly, now the factor of increasing the money supply in the United States is simply in the first place. During the last reporting week, professional traders opened 6.2 thousand buy contracts and closed 8.5 sell contracts. Thus, their net position increased by 14.7 thousand contracts. Therefore, it is possible that the major players realized that the European currency will still rise in price, and the dollar will fall, and they decided to trade according to the trend themselves. If earlier it was the big players who formed the trend, now they follow the trend. In general, from our point of view, the probability of further growth of the European currency in 2021 is very high.
The macroeconomic background this week was relatively weak. The first three trading days of the week were generally semi-weekends. There were no minor reports. Only on Thursday, the European Union held a summing up of the ECB meeting, and nothing was interesting. The European currency came under pressure today as Christine Lagarde's rhetoric was overly "dovish" and pessimistic. However, the euro currency lost 17 points. And on Monday, when there was no news at all, it gained 66. Thus, in general, the ECB meeting was really "passing". If it weren't for Christine Lagarde, there would have been no reaction at all. On Friday, the main event of the day was the index of business activity in the services sector of the European Union, which for the first time in a long time rose above the "red line" and amounted to 50.3 points. However, it is hardly possible to conclude that the euro rose by 70 points because of the report on business activity. However, it is quite possible that the markets reacted to this report with purchases, but only in the context of maintaining the overall upward trend.
Trading plan for the week of April 26-30:
1) On the 24-hour timeframe, the trend continues to change to an upward trend. The price has reached the Senkou Span B line (1.2091) and now it must either be overcome or rebound. In the first case, the following targets for the upward movement will be the 22nd level and 1.2347. In the second - a pullback of 100-200 points will follow. In general, we continue to expect further growth of the European currency.
2) The downward trend has been temporarily reversed. We still believe that the US dollar does not support global fundamentals, so it will not continue to grow in 2021. However, we remind you that technical factors must support any fundamental theory. Therefore, it is not recommended to trade down for the time being since the pair has gone above the critical line. Specific hopes for a resumption of the downward movement may appear only below the Kijun-sen line (1.1891).
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.
