Analysis of EUR/USD, 5-minute chart
The euro/dollar pair continued its upward movement on Monday and added more than 100 points in a day. On level ground. There were no macroeconomic statistics or "foundations" on Monday either in the US or in the EU, however, traders found reasons to buy the pair. Thus, the price is again above the lines of the Ichimoku indicator and again rose to price parity. Despite the strongest growth over the past two trading days, the prospects for the euro remain rather vague. On the 24-hour timeframe, the price finally broke through the Ichimoku cloud, but at what cost! All the most important events of the month are behind us, but this week we still have to "survive" the US inflation report. We believe that the euro's current growth will not last for long, but technical buy signals are slowly starting to appear. Maybe we will finally see the end of a long-term downward trend!
There were only two trading signals on Monday. At first, the price bounced off the extreme level of 0.9945 not very accurately, but managed to go in the right direction only by 9 points. Then it returned to the level of 0.9945 and settled above it, so the short position closed at a loss of about 20 points. However, the buy signal also had to be worked out, and it covered the losses on the first position, and also made it possible to earn, because by the end of the day the pair reached the nearest target level of 1.0019, near which the position should have been closed. Profit amounted to at least 55 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
has overcome the Ichimoku cloud on the 24-hour timeframe, as well as all the Ichimoku lines on the 4-hour timeframe. So far, the movement seems confident, but what are the reasons for it? It confuses us that the pair is growing for almost no reason. We can assume that these are echoes of the previous week, but in this case it would be more logical if the pair fell rather than grew. On Tuesday, the pair may trade at the following levels: 0.9747, 0.9844, 0.9945, 1.0019, 1.0072, 1.0124, 1.0195, as well as the Senkou Span B (0.9900) and Kijun-sen lines (0.9874). 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. Today, the European Union will publish a report on retail sales. Meanwhile, there is nothing in the US. Therefore, there will be nothing to react to, but the volatile movement may persist.
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.
