EUR/USD - 24H.
The EUR/USD currency pair continued its upward movement over the past week. Although it is better to say: it maintained an upward trend because the upward movement was very weak, and three of the last five trading days were flat. However, on Friday, there was an unexpected collapse in quotes. At the same time, this phenomenon was observed both in the euro/dollar pair and in the pound/dollar pair. Thus, the US currency became more expensive across the entire spectrum of the market. Respectively, we can conclude that the reasons for such a strong movement again lie in the US and are associated with the dollar and not with the euro or pound. Of course, at first glance, the reason is banal and clear: traders recorded part of the profit on both pairs at the end of the trading week, which led to a movement in the opposite direction to the trend. However, we would also not rule out the entry of large players into the market with deals to buy the dollar. These two reasons are almost equivalent since neither the first phenomenon nor the second one could be predicted. For such cases, a Stop Loss order is placed since no one in the world can predict the actions of large players. Thus, the upward trend is still maintained, and the pair have just started to correct. It is what is happening from a technical point of view. Recall that the pair grew for more than three weeks without a single correction and gained 450 points during this time. Therefore, a move down by 100-200 points is just a correction. The main thing now is that the pair does not go below the critical line and the Senkou Span B line, which are located not so far away. However, if the reasons we discussed above are correct, then this downward movement will not be long-term.
COT report.
During the last reporting week (April 20-26), the EUR/USD pair increased by 50 points. Recall that since February, major players have been intensively reducing contracts for buying and opening contracts for selling. However, in the last couple of weeks, there has been an increase in the "bullish" mood among the "Non-commercial" group of traders. Recall that this is the most important group of traders, which usually determines the trading vector. During the reporting week, professional players opened 5.5 thousand buy contracts and 2.9 thousand sell contracts. Thus, the net position increased by 2.6 thousand contracts. It is not much for the euro currency. In general, the number of contracts for purchase remains much higher than for sale: 202 thousand against 121 thousand. Therefore, in general, we can conclude that the upward mood among traders remains and even slightly increases. We also remind you about the factor of pouring trillions of dollars into the American economy, which cannot but affect the dollar exchange rate on the international currency market. Recall that even if the major players will sell the euro currency in billions, but the Fed will print dollars in trillions, the euro currency will still become more expensive. COT reports show the actions of major players in the European currency but do not show the Fed's actions against the dollar. Given that the US government will continue to develop more and more new stimulus packages for the economy, we believe that the economy continues to remain in a "post-crisis state" when it is impossible to do without cash injections and incentives. It means that these infusions are in the first place in terms of the degree of influence and not the actions of major players.
The key event of the current week can be called the Fed meeting. However, although the sign of this event is "loud," the Fed and Jerome Powell did not personally inform the markets of anything new. The US dollar fell after the meeting results were summed up, as probably a certain part of traders wanted to hear some "hawkish notes" in Powell's rhetoric. However, the head of the Federal Reserve dispensed with hints of a possible tightening of monetary policy, which disappointed the markets. But the macroeconomic statistics were once again ignored. It also applies to the relatively important report on orders for durable goods in the United States, released on Monday, and the important report on GDP for the first quarter, released on Thursday. On Friday, the European Union published a package of important statistics, but the European currency began to fall in price in the morning, without even waiting for its publication. At the same time, most of the reports were more positive than traders expected, so there definitely should not have been a collapse of 100 points after this data. In general, statistics continue to have a rather indirect impact on the pair's movement.
Trading plan for the week of May 3-7:
1) On the 24-hour timeframe, the trend has changed to an upward trend, but at this time, a correction has begun. The targets for this correction are the Ichimoku Senkou Span B (1.1973) and Kijun-sen (1.1927) indicator lines. A rebound from any of them can trigger the resumption of the upward movement. We believe that the current upward trend is not yet complete. Still, we remind you that in any case, any forecast should be treated as an assumption or hypothesis and not as a 100% correct trading recommendation. Stop Loss has not been canceled.
2) The downward trend has been temporarily reversed. We still believe that the US dollar does not support global fundamentals, so it will continue to fall in price 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 is located above the critical line. Some hopes for a resumption of the downward movement may appear only below the Kijun-sen line (1.1927).
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.
