EUR/USD 5M
The euro/dollar pair managed to trade in different directions on Monday. There was a formal reason for such movements, since weak business activity indices in the services and manufacturing sectors were published in the European Union in the morning, and similar US ones in the afternoon. However, we recall that in the past few days, both major pairs have been trading very inadequately and it is difficult to predict. Very often we see intraday reversals, corrections, pullbacks. Naturally, when a pair changes direction ten times a day, it becomes very difficult to trade. The euro continues to rise. We can see that the market still does not understand why it should buy the euro? There will be a European Central Bank meeting this week at which the rate will be raised by 0.75% with a probability of almost 100%. But the Federal Reserve will also raise its rates in early November. And the Fed rate is still much higher than the ECB rate. Therefore, we do not expect the euro to sharply rise, but the "swing" seems to have already begun.
In principle, the nature of the pair's movement on Monday is perfectly visible on the 5-minute timeframe. All trading signals formed around one level 0.9844, and there were as many as eight of them. This, at least, indicates that the price spent a lot of time around the level of 0.9844, isn't this a sign of a flat? Quotes still went up a bit during the US session (immediately after the release of data on business activity), but then the same flat began. Thus, traders could only try to work out the first two signals. In both cases, the price failed to move even 15 points in the right direction, so both positions closed with a small loss. Once again, we urge everyone to be very careful in the near future.
COT report:
The euro Commitment of Traders (COT) reports for 2022 could be used as good examples. In the first part of the year, the reports were pointing to the bullish sentiment among professional traders. However, the euro was confidently losing value. Then, for several months, reports were reflecting bearish sentiment and the euro was also falling. Now, the net position of non-commercial traders is bullish again and the euro is still dropping. This could be explained by the high demand for the US dollar amid the difficult geopolitical situation in the world. Even if demand for the euro is rising, high demand for the greenback prevents the euro from growing. In the given period, the number of long non-commercial positions increased by 6,500, while the number of shorts decreased by 4,000. Accordingly, the net position increased by about 10,500. This fact is not of particular importance, since the euro still remains "at the bottom". At this time, commercial traders still prefer the euro to the dollar. The number of longs is higher than the number of shorts for non-commercial traders by 48,000, but the euro cannot derive any dividends from this. Thus, the net position of the non-commercial group can continue to grow further, this does not change anything. If you look at the total open longs and shorts for all categories of traders, then shorts are 22,000 more (586,000 vs 564,000). Thus, according to this indicator, everything is logical.
We recommend to familiarize yourself with:
Overview of the EUR/USD pair. October 25. Boring Monday without bright splashes at the US session.
Overview of the GBP/USD pair. October 25. Elections, elections...
Forecast and trading signals for GBP/USD on October 25. Detailed analysis of the movement of the pair and trading transactions.
EUR/USD 1H
You can see on the hourly timeframe that the pair has begun to form a new upward trend, but the movement is more like a "swing". Recall that such problems usually do not exist during periods of a decline, since it moves down with much more willingness than up. Therefore, we still believe that it is very difficult to expect the pair to show strong growth. It may continue for some time, but the dollar still looks preferable. On Tuesday, trading could be performed at the following levels: 0.9553, 0.9635, 0.9747, 0.9844, 0.9945, 1.0019, 1.0072, as well as Senkou Span B (0.9754) and Kijun-sen lines (0.9800). Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also additional support and resistance levels, but trading signals are not formed near them. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. No important events or reports are scheduled in the European Union and America. Thus, we will likely see a flat or "swing" today.
What we see on the trading charts:
Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT charts reflects the net position size of each category of traders.
Indicator 2 on the COT charts reflects the net position size for the non-commercial group.
