EUR/USD 5M
The EUR/USD pair was trading very actively on Tuesday, but this was triggered by only one event. The US inflation report! Traders clearly did not expect that instead of reducing inflation to 4.9%, it will rise to 5.4% y/y. Thus, the US currency has significantly strengthened its position, as most traders now expect an even faster rollback of the Federal Reserve's quantitative stimulus program. This is not an obvious conclusion, since the rise in inflation is a negative moment for the economy and the currency. However, this was the reaction of the markets. However, the dollar did not rest on its laurels for a long time, since after the 55-point growth (which is not so much in reality), an upward pullback immediately followed. Let's now move on to the analysis of trading signals and positions that should have been opened based on them. Everything here is very, very boring. Not a single trading signal was generated during the European trading session, since the price did not even approach the key lines and levels. All major movements took place during the US trading session. The first sell signal was formed neatly at the time when the US inflation report was published. Naturally, it should not have been worked out, since the report was very important, and the reaction of the markets could not be predicted.. The next two signals should not have been worked out either, as they formed immediately after the inflation report. It was only possible to work out the last fourth sell signal in the form of a price rebound from the critical Kijun-sen line. The signal was quite clear, but it had already formed in the late afternoon, so it should have been manually closed in a profit of about 10 points or around the level of 1.1807 with a bit more profit. Therefore, quite a lot of things did not work out yesterday, but there were few signals that should have been worked out.
Overview of the EUR/USD pair. July 14. The euro is sinking in the abyss of traders' reluctance to trade the main currency pair.
Overview of the GBP/USD pair. July 14. US inflation continues to rise. UK authorities will lift the quarantine on July 19.
EUR/USD 1H
You can see on the hourly timeframe how the price bounced three times from the level of 1.1881 and fell, thereby breaking the critical line. Unfortunately, the nature of the euro/dollar pair's movement is still heavy and unappealing. The pair has been tossed from side to side in the past few days, and there is no clear trend at this time. It is impossible to form a new trend line or channel, so there is nothing for traders to rely on when making trading decisions on the hourly timeframe. We still recommend trading from important levels and lines on Wednesday. The nearest important levels at this time are 1.1784, 1.1807, 1.1881, 1.1922, as well as the Senkou Span B (1.1877) and Kijun-sen (1.1830) lines. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. Signals can be rebounds or breakthroughs of these levels and lines. Do not forget about placing a Stop Loss order at breakeven if the price moves 15 points in the right direction. This will protect you against possible losses if the signal turns out to be false. The European Union will publish a report on industrial production on Wednesday which is unlikely to cause a reaction from traders. And Fed Chairman Jerome Powell will deliver a speech in the US, which can have a very strong impact on the market. Traders anticipate Powell's comments after finding out that inflation accelerated to 5.4% in June, as he previously said that inflation would start to slow. Therefore, Powell's words could provoke a strong new market reaction.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP/USD pair.
COT report
The EUR/USD pair fell by 100 points during the last reporting week (June 29-July 5). Thus, one could expect to see a new weakening of the bullish sentiment of professional players in the Commitment of Traders (COT) report. This is exactly what we saw in the latest report that was released on Friday. The number of buy contracts (longs) for the reporting week increased by 4,000, and the number of sell contracts (shorts) - by 16.5 thousand. Thus, the net position of the "non-commercial" group of traders decreased by 12.5 thousand. Therefore, at the moment we can say that market participants continue to get rid of long positions and build up shorts. Therefore, it is possible to predict a further fall in the European currency. But not everything is so simple. We have already said that the movements of the pair over the past few months look just like a correction against the global upward trend. In addition, the US government and the Fed continue to inject hundreds of billions of dollars into the US economy, inflating the money supply and stimulating inflation. Therefore, big players can get rid of euro positions, but at the same time the dollar supply in the markets will grow, which may lead to the opposite effect. A situation may arise in which the net position of professional players on the euro will decline, while the euro currency will grow. Actually, in October-November-December 2020, this is exactly what happened. The green line of the first indicator (net position of the non-commercial group) was decreasing, while the euro was growing. Thus, we recommend that traders pay more attention to technical analysis.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the non-commercial group.
