EUR/USD - 24H.
The EUR/USD currency pair has been in a downward correction for most of the past week. However, we cannot call the general movement down by 140 points (from the last local maximum) globally (on a 24-hour timeframe). It is just another "rollback." The euro/dollar pair quotes fell to the critical line, which was located very close. Thus, we have witnessed a small pullback, after which all signs of an upward trend remain.
It should be noted that over the past few weeks, the pair has been moving in a mode that is very similar to the flat, but it is not. The trades are held in a minimal range. However, there are no clear boundaries of the side channel. All these movements occur near the 3-year highs of the pair, so we remain with our previous opinion: the upward trend in global terms remains, and the depreciation of the US dollar will continue in 2021. In favor of this, the same factors speak as before. Nothing has changed. Trillions of dollars continue to pour into the American economy, inflating its money supply and increasing the supply of dollars in the markets. In addition, judging by the latest COT reports, the major players realized their secondary role in forming the course and followed the trend, as their net position increases every week. In addition, we have already said that in 2017, the global downward trend presumably ended. Thus, we see the formation of an upward trend that can last for another 5-6 years freely, and the quotes of the euro can rise by another 10-20 cents. In general, at this time, we do not see any reason to assume that the process of the fall of the US currency is complete. We have also said many times that macroeconomic statistics have almost no effect on the pair globally.
COT report.
During the last reporting week (May 25-31), the EUR/USD pair fell by 25 points. The new COT report, which was released yesterday, showed that professional traders continue to increase their buying positions in the European currency. This time, they opened only 751 new buy contracts, but at the same time, closed 3.9 thousand sell contracts. Thus, the net position for this group of traders increased again by 4.6 thousand. The "bullish" mood of professional traders is becoming stronger, which is seen in the second indicator in the illustration above, which shows the changes in the net position for the "Non-commercial" group. We see that since mid-April, this indicator has constantly been growing, increasing the likelihood of further strengthening of the European currency. We have already said that the actions of the Fed and the US Congress now overlap the actions of players in the foreign exchange market. It is because professional traders make trades in both directions. The Fed and the US authorities are constantly pouring hundreds of billions of dollars into the economy. Therefore, the dollar is declining, despite the actions of the foreign exchange market participants themselves. It seems that in recent months, players have realized what they will have to work on within 2021 and stood "on the trend," not wanting to compete with the Fed. As a result, in early April, judging by the first indicator, a new round of the upward trend began.
The current trading week was just crazy in macroeconomic terms. A huge number of different statistics were published, and traders finally worked out most of it. For the first time, probably in the last year and a half. Of course, not all reports are lucky. For example, the level of inflation in the European Union did not impress traders at all. The players also passed business activity indices for the Eurozone. On Thursday, the ADP report, which has been strenuously ignored by the markets over the past year, without causing any reaction, showed that the number of employees in the private sector changed by 1 million in May instead of the forecast of +645 thousand. On such data, the US dollar increased, giving traders hope to complete the next round of strengthening the European currency. The ISM services PMI also supported demand for the dollar on Thursday. On Friday, however, traders became hostage to their inflated expectations. They decided that if the ADP report showed an increase of 1 million, then Nonfarm Payrolls will also grow by 1 million. In reality, Nonfarm was slightly weaker than the forecast of +645 thousand. Thus, the increase was still quite good, especially against the background of a decrease in the unemployment rate from 6.1% to 5.8%. But the markets were offended by such statistics and began to get rid of the US currency again.
Trading plan for the week of June 7-11:
1) On the 24-hour timeframe, the trend continues upward, as the price is held above the critical line. Thus, long positions also remain relevant. We believe that the nearest target at this time remains a 3-year high of 1.2349. The price has slightly slowed down its upward movement in recent weeks. However, it still maintains an upward trend, and the US dollar is not being helped by either statistics or Jerome Powell's speeches.
2) The downward trend is still not relevant. The US currency has support only in the form of macroeconomic factors. Despite the high rate of recovery of the US economy, this factor still has no beneficial effect on the dollar exchange rate. Thus, it will be possible to talk about possible stronger growth of the US dollar than 140 points if the price is fixed at least below the Kijun-sen line. In this case, the downward movement may continue with the target of 1.2062.
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.
