EUR/USD - 24H.
The EUR/USD currency pair was adjusted during the current week after the collapse last week. However, it managed to recoup only about 80-110 points in total. So far, it has not even managed to gain a foothold back inside the Ichimoku cloud. Thus, it is too early to talk about the end of the downward movement now. However, let us recall the general picture of the state of things. Globally, the upward trend continues, which has been going on for almost 1.5 years. After the local highs were updated in early January 2021, the euro/dollar pair began to adjust, after which it tried to resume the upward trend. However, it failed to do so. Thus, a new round of global downward correction has just begun.
Moreover, according to wave analysis, corrections often have three waves. Thus, it is this third wave that can be formed at this time. And its goals can be located near the lows of the first wave, that is, around the 17th level. Thus, in the future, the pair may fall to this level or slightly lower. We draw the attention of traders that fundamental global factors continue to remain not on the side of the US currency. The reasons that raised the pair so high, and the dollar so low, continue to be relevant. We are talking about the hundreds of billions of dollars that the Fed is pouring into the American economy and about the upcoming budget for the 2022 fiscal year in the United States, which provides for spending 6 trillion dollars, of which four will need to be taken out of nowhere, as usual. All these expenses are financed simply by the printing press. As a result of which the money supply is inflated, inflation is rising, and the dollar is devalued both within the country and on the foreign exchange market.
COT report.
During the last reporting week (June 15-21), the EUR/USD pair fell by 200 points. We recommended in previous articles to wait for the publication of the new COT report since it should have included those days when traders were actively working out the results of the Fed meeting. It was then that the currency pair fell by 250 points, after which it is currently recovering. According to the latest COT report, professional traders closed about 5 thousand buy contracts during the reporting week and opened 24 thousand sell contracts. It means that the net position for the "Non-commercial" group of traders immediately decreased by 29 thousand, which is quite a lot. Thus, the "bullish" mood of the major players is still "bullish" but continues to weaken. In principle, the weakening of the "bullish" mood is visible both on the first indicator and on the second. On the first indicator, the green line (the net position of the "Non-commercial" group) began to approach the red line (the net position of the "Commercial" group), which means the end of the current trend. Maybe it is the global trend that will not end, but there is no point in denying that a new round of downward movement has now begun. The second indicator shows a decrease in the size of the net position for non-commercial traders over time. The same thing: since this indicator is falling, the euro's chances also fall. However, in general, we recall that the total number of buy positions from significant players is now 210 thousand, and sell positions - 120 thousand. Therefore, the mood remains "bullish."
The current trading week was very quiet. At the end of last week, we said that this week could be very boring for the euro/dollar pair since few really important events were planned. In practice, it turned out that way. There were few events, the markets reacted reluctantly, and most macroeconomic statistics were utterly ignored. During this week, Jerome Powell and Christine Lagarde spoke, who stuck to their old rhetoric and did not surprise the markets with anything, and reports on GDP for the first quarter and orders for long-term goods were published in the States, which did not cause any reaction from traders at all. Thus, we can conclude that the pair was corrected all this week, and the reasons for this correction were purely technical. Most likely, the correction will continue next week since, at the moment, it looks very weak, and the dollar's position is not so strong that it will resume a strong fall without any specific reasons. Recall that of the 420 points passed down during the last round of the downward movement, 280 were passed in three days after the Fed announced the results of its meeting.
Trading plan for the week of June 28-July 2:
1) In the 24-hour timeframe, the trend remains downward. The drop in quotes may now continue up to the 17th level or even slightly lower. So far, it is completely unclear whether the bears will find the strength to continue selling the pair because most of the distance of the current downward spiral was covered exclusively on one event. And for new sales, the bears may need new grounds. Nevertheless, the option with a small departure to the top and the resumption of the downward movement is now the most likely.
2) The upward movement is canceled for the time being, although the fundamental global factors for the pair remained the same as they were. However, the price has been fixed below the Kijun-sen and Senkou Span B lines, so it does not make sense to consider buy orders now. Therefore, now for the possibility of opening long positions, you should wait for signals to change the trend to an upward one. We believe that this can happen between the levels of 1.1600 and 1.1700.
Explanations to the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced earlier.
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.
