Analysis of EUR/USD 5M
On Thursday, EUR/USD once again moved more sideways than down or up, as clearly seen in the chart above. The price overcame the critical line and it rebounded from this mark twice. This is despite the fact that the line itself is constantly rising, squeezing the price from below. Thus, the bearish correction (or the downtrend), which we have mentioned several times before, is still absent. Yesterday, the pair had a decent chance of falling for technical reasons, but in the morning, six PMIs for the manufacturing and services sectors of Germany and the EU were published in the European Union. All six PMIs turned out to be higher than the previous month and higher than forecasted. Therefore, the euro eked up a small gain. In the second half of the day, it fell, but the decline was even weaker than the preceding rise.
Three trading signals were generated. Initially, the pair surpassed the 1.0889-1.0895 range and then rebounded twice from above. In the first and second cases, it managed to rise by about 15-20 pips, so for both trades, a Stop Loss at breakeven should have been set, and both trades closed this way. The third buy signal should be ignored since the first two turned out to be false. The overall volatility of the day was less than 50 pips.
COT report:
On Friday, a new COT report for November 7 was released. Over the past 12 months, the COT report data has been consistent with what's happening in the market. The net position of large traders (the second indicator) began to rise back in September 2022, roughly at the same time that the euro started to rise. In the first half of 2023, the net position hardly increased, but the euro remained relatively high during this period. Only in the last three months, we have seen a decline in the euro and a drop in the net position, as we anticipated. Currently, the net position of non-commercial traders is still bullish and this trend is likely to lose momentum soon.
We have previously noted that the red and green lines have moved significantly apart from each other, which often precedes the end of a trend. This configuration persisted for over half a year, but ultimately, the lines have started moving closer to each other. Therefore, we still stick to the scenario that the upward trend is over. During the last reporting week, the number of long positions for the "non-commercial" group increased by 1,700, while the number of short positions fell by 2,000. Consequently, the net position increased by 3,700. The number of BUY contracts is still higher than the number of SELL contracts among non-commercial traders by 89,000. In principle, it is now evident even without COT reports that the euro is set to extend its weakness. However, the corrective phase has not yet ended.
Analysis of EUR/USD 1H
On the 1-hour chart, the pair continues a corrective trend. Two out of the five phases in the current correction were triggered by weak U.S. reports, and it is quite difficult to justify the current upward movement. For now, we can say that the recent reports have been supporting the euro. Nonetheless, it seems like the market is ready to buy for no reason. We need to wait for the pair to breach the Senkou Span B and Kijun-sen lines in order to identify the recommencement of the downtrend in the medium-term.
On November 24, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0806, 1.0889, 1.0935, 1.1012, 1.1092, 1.1137, as well as the Senkou Span B line (1.0776) and Kijun-sen line (1.0895) lines. The Ichimoku indicator lines can shift during the day, so this should be taken into account when identifying trading signals. There are also auxiliary support and resistance levels, but signals are not formed near them. Signals can be "bounces" and "breakouts" of extreme levels and lines. Don't forget to set a breakeven Stop Loss if the price has moved in the right direction by 15 pips. This will protect against potential losses if the signal turns out to be false.
On Friday, European Central Bank President Christine Lagarde and Vice President Luis de Guindos will speak, Germany will publish the final GDP value for the third quarter, and the U.S. will release business activity indices. Overall, these events are not crucial.
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.
