Analysis of EUR/USD, 5-minute chart
Last Friday, the euro/dollar pair soared up unexpectedly for many. Naturally, such a powerful movement could not take place from scratch, it began after the release of macroeconomic statistics in the US, in particular, reports on unemployment and Nonfarm. We have already said in previous articles that both of these reports in aggregate cannot be regarded as negative for the dollar. And even more so, it was impossible to expect the dollar to fall by 200 points, when the number of Nonfarm exceeded all the most optimistic forecasts. However, we have what we have. The pair rose by 200 points and completely confused the technical picture. Last week, it mostly fell and there were reasons for this, but now it is very difficult to say what will happen next. After Friday's upward spurt, a downward correction is needed. The market reaction to Friday's events was illogical. The ascending trend line has been overcome, but now the quotes are already above it. The Senkou Span B line on the 24-hour timeframe has not been overcome, but the price will try to surpass it again. In general, the most confusing situation.
Unfortunately, on Friday it was not possible to catch the upward movement from the very beginning. On the other hand, it started at the time when the US reports were released, and at that time it was clearly not recommended to open any positions. Therefore, the first trading signal was formed only in the area of 0.9844-0.9852, and it should have been worked out with a long position. The price quickly returned to the indicated area, but on the second attempt it continued to grow and almost reached the level of 0.9945. It was possible to close the position manually in the late afternoon, or it was possible by a signal near the Senkou Span B (second) line. In any case, there was profit worth around 50 points.
COT report
In 2022, the Commitment of Traders (COT) report for the euro is becoming more and more interesting. 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. The euro managed to rise above its 20-year low, adding 500 pips. 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 positions initiated by non-commercial traders increased by 13,000, whereas the number of short orders declined by 17,000. As a result, the net position increased by 30,000 contracts. However, this could hardly affect the situation since the euro is still at the bottom. The second indicator in the chart above shows that the net position is now quite high, but a little higher there is a chart of the pair's movement itself and we can see that the euro again cannot benefit from this seemingly bullish factor. The number of longs exceeds the number of shorts by 106,000, but the euro is still trading low. Thus, the net position of non-commercial traders may go on rising without changing the market situation. If we look at the overall indicators of open longs and shorts across all categories of traders, then there are 23,000 more shorts (617,000 vs 594,000).
Analysis of EUR/USD, 1-hour chart
You can see that the pair will try to resume the upward direction on the one-hour chart, but what will come of it? We have already noted that the market traded illogically on Thursday and Friday, so we can see a downward movement on Monday-Tuesday. Moreover, there will be no statistics and events these days. On Monday, the pair may trade at the following levels: 0.9635, 0.9747, 0.9844, 0.9945, 1.0019, 1.0072, 1.0124, as well as the Senkou Span B (0.9900) and Kijun-sen lines (0.9852). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. 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 and reports are expected in the US and the EU for today, so traders will have to go "bare" or go on the events of last week, which may still not be fully worked out.
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.
