Analysis of EUR/USD 5M
EUR/USD has been trading in a flat phase on Monday. The pair traded around the level of 1.1234, which we decided to remove from the chart at the end of the day. In principle, the level itself is not to blame for the flat forming around it. However, this flat is not even logical. Recall that the pair rallied last week and failed to initiate a bearish correction. Although there was no obstacle for it to do so on Friday and Monday. However, fundamentally and macroeconomically, it makes no sense. Such market behavior only points to one thing: traders are still focused solely on long positions and have no intention of taking profits at the moment. Therefore, the euro may continue to rise further, even though there are still no grounds for it.
It makes no sense to analyze Monday's trading signals. The volatility totaled around 45 pips, and the pair moved sideways. Traders may have tried to trade one or two initial signals around the 1.1234 level, but by the middle of the European session, it became clear that there would be no strong movements. The situation slightly improved with the opening of the US session, but how can we expect an improvement with such volatility? Therefore, we need to wait for the flat to end and volatility to rise.
COT report:
On Friday, a new COT report for July 11 was released. In the last 10 months, COT reports fully corresponded to what is happening in the market. The chart above clearly shows that the net position of major traders (the second indicator) began to grow in September 2022 and at about the same time the euro started climbing too. In the last 5 months, the net position has not risen but the euro remains at very high levels. At the moment, the net position of non-profit traders is bullish. The euro keeps climbing against the US dollar.
I have already mentioned the fact that a fairly high value of the net position signals the end of an uptrend. This is also confirmed by the first indicator where the red and green lines are very far from each other. Usually, it precedes the end of the trend. During the last reporting week, the number of long positions of the non-commercial group of traders increased by 3,000 and the number of short ones- by 5,700. The net position declined by 2,700 positions. The net position is falling, while the euro is growing. This is illogical. The number of long positions is higher than the number of short ones of non-commercial traders by 140,000. This is a very large gap as the difference is almost threefold. Even without COT reports, it is obvious that the euro should decline but speculators are still in no hurry to sell it.
Analysis of EUR/USD 1H
On the 1H chart, the euro/dollar pair continues to grow almost non-stop. The pair failed to correct on Friday and Monday, and now it will probably rise again. I believe that traders have started a new sell-off of the US dollar. So, economic reports have practically no effect on its movements. There is no need to build a trend line as the bullish sentiment is too strong. There are no clear support levels.
On July 18, traders should pay attention to the following key levels: 1.0806, 1.0868, 1.0943, 1.1012, 1.1092, 1.1137, 1.1185, 1.1274, 1.1321, 1.1391, as well as the Senkou Span B (1.0930) and Kijun-sen (1.1130) lines. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. Traders look for signals at rebounds and breakouts. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 15 pips. This will protect against possible losses if the signal turns out to be false.
Today, there are no important events or reports lined up in the EU. The US will release reports on industrial production and retail sales. Since we have witnessed the absence of influential economic releases in the last two days, even these reports can add some excitement to the pair's movement. But does anyone expect significant support for the dollar due to these reports? And the dollar can fall even without them.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
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 is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
