5M chart of EUR/USD
EUR/USD sharply grew, and equally came under pressure on Thursday. What's interesting is that these movements can be considered logical. During the European session, the pair recovered from Wednesday's decline, while during the US session, it was influenced by strong economic data. Earlier, Federal Reserve Chairman Jerome Powell said that a 'strong majority' of FOMC supports further rate increases in 2023, which boosted the dollar. Yesterday, the US GDP report showed a growth of 2% in the first quarter instead of the forecasted 1.4%. Such a strong deviation in the GDP report is extremely rare. However, the US economy, which has been consistently slowing down, pleasantly surprised the market. We have previously mentioned that the US economy is currently stronger than the EU economy, which is another reason to buy the dollar.
There were a sufficient number of trading signals on Thursday. First, the pair consolidated above a critical line, which produced a buy signal. Shortly after, the price reached the 1.0943 level and rebounded from it. At this point, it was better to close long positions and open short positions (although this was risky). The pair immediately fell, hitting 1.0868. It was better to take profits on short positions when there was a reverse closure above the Senkou Span B line. The last buy signal did not yield profits, but the first two trades resulted in a good outcome.
COT report:
On Friday, a new COT report for June 20 was released. In the last 10 months, COT reports have fully corresponded to what is happening on the market. The chart above clearly shows that the net position of big traders (the second indicator) began to grow again in September 2022. At the same time, the euro resumed an upward movement. The net position of non-commercial traders is bullish. The euro is trading at its highs against the US dollar. I have already mentioned that a fairly high value of the "net position" indicates the end of the uptrend. The first indicator also signals such a possibility as the red and green lines are very far from each other. It often occurs before the end of the trend. The euro tried to start falling a few months ago but there was only a pullback.
During the last reporting week, the number of long positions of the "non-commercial" group of traders increased by 3,200 and the number of short positions rose by 10,400. Accordingly, the net position fell by 7,200 contracts. At the moment, even without the COT reports, it is clear that the pair should continue to decline.
1H chart of EUR/USD
In the 1-hour chart, the pair consolidated below the ascending trendline but is not in a hurry to plunge. However, it has also breached the Senkou Span B line, and the macroeconomic and fundamental background allows for a potential decline in the pair, which is significantly overbought. We believe that now is a good time for a new downward phase in the medium term, but still within the range of 1.05-1.11.
On June 30, trading levels are seen at 1.0658-1.0669, 1.0762, 1.0806, 1.0868, 1.0943, 1.1012, 1.1092, 1.1137, as well as the Senkou Span B line (1.0893) and the Kijun-sen line (1.0928). Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance although no signals are made near these levels. Signals could be made when the price either breaks or bounces from these extreme levels. Do not forget to place Stop Loss at the breakeven point when the price goes by 15 pips in the right direction. In case of a false breakout, it could save you from possible losses.
Today, the European Union will publish an important inflation report, which, in light of yesterday's inflation report in Germany, gains additional intrigue and importance. There are strong reasons to expect that inflation in June will decrease slightly or not slow down at all, which could once again support the euro.
Indicators on charts:
Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals.
Kijun-sen and Senkou Span B are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines.
Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals.
Yellow lines are trend lines, trend channels, and other technical patterns.
Indicator 1 on the COT chart is the size of the net position of each trader category.
Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.
