Analysis of EUR/USD 5M
Yesterday, EUR/USD continued its downward movement and ended up near the 1.0658-1.0669 area again. During the US session, the price bounced off this area, so the pair may start a new corrective phase. The price is testing this area for the third time, so it is possible that it will bounce off it again for the third time. To be more precise, it already has. The pair has also been trading in a sideways channel between the levels of 1.0669 and 1.0757 for two weeks now. Therefore, EUR/USD doesn't need a macroeconomic or fundamental background to rise by 70-80 pips.
The global downward trend remains intact, but the price may spend a considerable amount of time in a flat or upward correction. We warned you that strong movements and sharp price changes should not be expected this week. There are no significant news or reports; the pair is moving solely based on technical factors. And since the technicals indicate an obvious flat, it is not surprising that the price is moving sideways. The pair may resume the downtrend once the price breaks out of the 1.0658-1.0669 area.
On the other hand, Wednesday's trading signals were quite pleasant. Early in the European trading session, the price "detached" from the critical line, and then, at the start of the US session, it reached the 1.0669 level. Therefore, traders could open short positions that brought about 30 pips of profit. The bounce from the 1.0669 level could be used to open long positions, and by the end of the day, the pair rose by 10-15 pips. Traders could have earned this amount on the second position. This is quite a good result since the overall volatility of the day was just about 50 pips. The long position can also be left open in anticipation of movement toward the upper boundary of the sideways channel.
COT report:
The latest COT report is dated June 11. The net position of non-commercial traders has remained bullish for a long time, and we're still dealing with the same situation. The bears' attempt to gain dominance failed miserably. The net position of non-commercial traders (red line) has been declining in recent months, while that of commercial traders (blue line) has been growing. But now we're seeing the opposite once again. This shows that buyers, not sellers, are currently gaining momentum again. This might be temporary since the downward trend is still valid.
We don't see any fundamental factors that can support the euro's strength in the long term, while technical analysis also suggests a continuation of the downtrend. Three descending trend lines on the weekly chart suggests that there's a good chance of further decline.
The red and blue lines are currently moving away from each other again, which indicates a build-up in long positions on the euro. During the last reporting week, the number of long positions for the non-commercial group decreased by 1,200, while the number of short positions increased by 23,000. Accordingly, the net position decreased by 14,200. We may witness the start of increasing bearish pressure. According to the COT reports, the euro has a lot of potential to fall.
Analysis of EUR/USD 1H
On the 1-hour chart, EUR/USD continues to form a new downtrend, which is part of the global trend. We still expect the single currency to fall, but the pair is currently going through a correction, and it may last for another week or two. Volatility has once again dropped to absolute lows, making it quite difficult to conduct analysis and trading. Sell signals are required for a new wave of the downtrend, and there are currently none of those – the price is trading in a flat range.
On June 27, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0797, 1.0836, 1.0889, 1.0935, 1.1006, 1.1092, as well as the Senkou Span B (1.0760) and Kijun-sen (1.0706) lines. The Ichimoku indicator lines can move during the day, so this should be taken into account when identifying trading signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 15 pips. This will protect you against potential losses if the signal turns out to be false.
On Thursday, the euro area economic calendar does not include any noteworthy reports. The US docket will feature three medium-impact reports – GDP, durable goods orders, and jobless claims. The market may react to these reports. The dollar needs strong data.
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;
