Analysis of EUR/USD 5M
EUR/USD did not show any notable movements on Tuesday. The pair has been trading in another local, horizontal channel at its peak values for several consecutive days. As in the case with the British pound, this means that the market simply does not want to take profits on long positions and open shorts.
We have repeatedly mentioned that the Federal Reserve remains hawkish, and none of the representatives of the US central bank gave reasons for the market to believe that the interest rate will be lowered in September. Moreover, the current level of consumer prices also gives no reason to expect a rate cut in September. Nevertheless, this doesn't matter to the market because it simply ignores the fundamental backdrop. Yes, the dollar has been in a difficult situation over the past few weeks due to economic reports in the US. However, that period of time has ended and there's still no downward correction in sight.
On top of that, three economic reports were published yesterday in the EU and the US, which supported the dollar. These reports were not crucial, but they were still worth highlighting. So how did the market react to these reports? It ignored the first two, and responded to the third one by gradually buying the dollar, which was completely offset by the end of the day. Therefore, even in the presence of strong US data, the greenback will not rise.
Yesterday's trading signals were exactly the same, which are inherent to the flat. First, the pair pushed away from the level of 1.0889, then consolidated below it, and then above it. The consolidation below 1.0889 was triggered by the US retail sales data, and this report did more harm than help since the market is still not ready to sell the pair. In any case, the sell signal should not have been executed, as the Kijun-sen line was below the level of 1.0889. And it was not possible to make money on buy signals since the pair did not actively rise.
COT report:
The latest COT report is dated July 9. The net position of non-commercial traders has remained bullish for a long time. 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. Currently, they are approximately equal, indicating the bears' new attempt to seize the initiative.
We don't see any fundamental factors that can support the euro's strength, while technical analysis also suggests that the price is in the consolidation zone – in a triangle. Now the pair's movement will depend on which border the price leaves.
Currently, the red and blue lines are approaching each other, which indicates a build-up in short positions on the euro. During the last reporting week, the number of long positions for the non-commercial group decreased by 1,500, while the number of short positions decreased by 11,600. As a result, the net position increased by 13,100. According to the COT reports, the euro still has significant potential for a decline.
Analysis of EUR/USD 1H
On the 1-hour chart, EUR/USD failed to break through the 1.0658-1.0669 area and continues to form a new uptrend. We currently have an ascending trend line, above which the upward trend remains intact. All the economic reports from the past few weeks have had a devastating impact on the dollar, so there's no sign of a decline yet. Meanwhile, the global downtrend remains on the 24-hour timeframe, which means that the pair could still fall back to the 1.06 level.
On July 17, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0797, 1.0843, 1.0889, 1.0935, 1.1006, 1.1092, as well as the Senkou Span B (1.0805) and Kijun-sen (1.0871) 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 Wednesday, the second estimate of EU inflation numbers for June may warrant investor attention, but it is unlikely to differ from the first estimate. The U.S. docket will feature reports on industrial production, building permits and housing starts. All reports are secondary of importance and are unlikely to provide great support for the dollar.
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;
