EUR/USD - 24H.
The EUR/USD currency pair continued to trade very inactively during the current week, although some candles in the illustration look quite large. And despite the Fed meeting and a rather voluminous package of macroeconomic statistics from the US and the European Union this week. On average, the pair's volatility was about 50 points every day, which is very small. However, the euro has already accustomed us to such volatility in recent months. The main thing is that the long-awaited pullback to the top began during this week since the pair practically stood in one place for two weeks. At the moment, we can say that the current round of the upward movement may be a correction. However, we believe that a new round of the global upward trend has begun, which has lasted for more than a year and a half. The illustration above clearly shows that the pair's quotes fell to the minimum of the last correction round. Thus, from a technical point of view, nothing prevents the pair from starting a new hike to the north now. We have already said that the global factor of pouring hundreds of billions of dollars into the US economy will continue to harm the dollar exchange rate. It does not mean that the dollar will fall constantly. However, this means that it will be under pressure until the Fed stops its QE program. And this week, traders could make sure that the Fed will not wind it down in the coming months. According to our assumptions, this will happen no earlier than in 7-8 months. Thus, at least until the end of 2022, the US currency may continue to become cheaper. And in January 2022, Jerome Powell will resign, and experts are sure that the most "dovish" member of the Fed board will come in his place. Thus, we can assume that the QE program will be in effect for a long time.
COT report.
During the last reporting week (July 20-26), the EUR/USD pair increased by 5 points. However, the pair's movements are not the main thing. The main thing is that the major players have been increasing the number of sales contracts for the sixth week in a row and closing buy contracts for the euro. It is seen in the second indicator in the illustration above, which has been steadily declining recently. Recall that this indicator displays the net position of the "Non-commercial" group, the most important group of traders. During the reporting week, non-profit traders closed 5,600 buy contracts and opened 1,700 sell contracts. Thus, their net position decreased by another 7,300 contracts. It suggests that the "bullish" mood of professional traders continues to weaken. At the same time, we would like to note that the euro has not started a new downward trend, which is a very important point. When the red and green lines of the first indicator (the net positions of the "Non-commercial" and "Commercial" groups of traders) move towards each other after a long period of distance, it means that the current trend is completed and a new one is emerging. However, in our case, we are talking about a correction against a global upward trend.
On the one hand, it turns out that the COT reports' readings and the pair's movement coincide. On the other hand, the upward trend persists, and the euro has not fallen in price. Moreover, it did not even manage to update the previous local minimum. From our point of view, this suggests that the actions of major players are again overlapped by the actions of the Fed, which continues to print money. Thus, the money supply in the United States continues to grow, which leads to the depreciation of the dollar. And this factor negates all the efforts of major players who are getting rid of the euro.
The current trading week was very calm, although there were quite a lot of different events. The Fed meeting made it clear that there will be no talk of curtailing QE in the coming months. Jerome Powell once again noted that the main thing for the regulator is the recovery of the labor market, and inflation can be ignored. Thus, the dollar did not receive support from the Fed. He did not receive any support from macroeconomic statistics either. The US GDP report for the second quarter showed that the growth rates are much lower than predicted. The US economy continues to recover at a very high pace. However, according to many experts, they are beginning to slow down. To slow down when inflation continues to rise, and the Fed continues to print money. Thus, this is a bad sign for the American economy. Well, the European statistics on Friday were ignored in the best traditions.
Trading plan for the week of August 2-6:
1) In the 24-hour timeframe, the trend remains downward. However, we believe that the number of factors that speak in favor of a new upward trend has increased. At the moment, the price is fixed above the critical line, which also increases the likelihood of a further hike to the north. Thus, until the price is fixed back below the critical line, purchases with the target of the Senkou Span B line are possible.
2) The downward movement has temporarily stopped. Thus, the sell orders are no longer relevant at this time. Therefore, they can be considered again no earlier than the reverse consolidation of the price below the Kijun-sen line. With the volatility that the euro/dollar pair has shown in recent weeks, the price may move along the critical line for some time. On the lower timeframes, you should trade according to the trends formed on them.
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.
