Analysis of EUR/USD 5M.
The EUR/USD pair continued its moderate downward movement
on Tuesday, which was in line with forecasts. Traders are expecting a faster and stronger fall in the euro. Yet, in the current circumstances, any decline is quite beneficial. On Tuesday, neither the European Union nor the United States published crucial economic reports. Today, the situation will not be much better. Only late in the evening, the Fed will announce its meeting results, which will certainly cause a surge in volatility. Nevertheless, the Fed's rate decision will hardly come as a surprise.
Despite the announced rate decisions and plans of the Fed and the ECB, the euro is projected to decline against the US dollar. Yesterday, all trading signals were formed near the Senkou Span B line. They all turned out to be false as the Senkou Span B line was exactly in the middle of the price range in which the pair was trading on Tuesday. Thus, traders could have opened positions for the first two signals. As for a buy signal, it was not even possible to set a Stop Loss order as the pair did even move by 15 pips in the right direction. After a sell signal, the pair went down by 15 pips. So, it was possible to set a Stop Loss at breakeven. As a result, the day ended with a minimal loss on one transaction.
COT report:
On July 18, a new COT report 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 40,100 and the number of short ones- by 1,500. The net position rose by 38,600 positions. The number of long positions is higher than the number of short ones of non-commercial traders by 179,000. 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. There are also no sell signals.
Analysis of EUR/USD 1H.
On the 1H timeframe, the pair continues to grow almost non-stop. If there were some reasons for an upward movement on Wednesday, there could also be some last Friday This is why it is rather surprising why the US dollar was falling on Monday, Tuesday, and Thursday. 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 the 1H time frame, the pair maintained a correction. It has broken through both lines of the Ichimoku indicator. I expect a much stronger fall from it. I assume the euro may continue its downtrend without even a rapid decline in the US dollar. However, it will definitely take time. So, this week there may even be a rebound before a new round of prolonged decline.
On July 26, one should pay attention to the following 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 (1.1109) and Kijun-sen (1.1126) 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, the economic calendar for the US and the EU is empty. However, the Fed will announce its rate decision in the evening. Apart from that, Jerome Powell will give a speech at the press conference. Thus, volatility may remain low during the day but increase in the evening.
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.
