EUR/USD 5-Minute Chart Analysis
The EUR/USD currency pair remained under downward pressure throughout Tuesday. For the second consecutive day, the pair gravitated toward the downside. The political crisis in France remains the only noteworthy event so far this trading week, and we've already discussed that in earlier reviews. However, we do not believe this political development is significant or impactful enough to justify two days of sustained euro declines. In our view, the U.S. government shutdown carries far more weight in the eyes of traders.
To be fair, the pair hasn't fallen too far — for two consecutive days, the 1.1657–1.1666 zone has halted the decline. Therefore, the newly formed uptrend technically remains intact, although the price continues to drift lower with each passing day.
If the 1.1657–1.1666 range is broken, then from a technical perspective, further downside in the pair would be justified. The question remains: on what basis can the dollar grow right now? Last week, the dollar ignored most of the negative news. More accurately, it was the market that ignored these developments; traders did not capitalize on the opportunity to sell the dollar again. That's why we continue to view the current market movement as illogical and inconsistent with fundamentals.
On the 5-minute timeframe, two trading signals were generated yesterday. During the night session, the price bounced from the Kijun-sen critical line. By the European open, the price had moved slightly away from the signal formation point, providing a chance for traders to go short. Later during the European session, the 1.1657–1.1666 range was retested, where the decline ended. This bounce could have been used as a buy signal, but euro growth never materialized by the end of the day. Volatility remained quite low.
Commitments of Traders (COT) Report
The latest COT report was dated September 23. As shown clearly in the chart above, non-commercial traders' net positions remained bullish for a long time. Bears briefly gained the upper hand at the end of 2024 but quickly lost it. Since Donald Trump began his second term as U.S. President, the dollar has been in steady decline.
We cannot say with 100% certainty that the dollar's fall will continue, but current global events strongly suggest that outcome. We still see no fundamental drivers to support a stronger euro, but there are plenty of reasons for dollar weakness.
The global downtrend remains intact, and at this point, it hardly matters what price trends looked like over the last 17 years. If Trump ends the trade wars, the dollar may begin to rise, but recent developments show that tensions are likely to continue in one form or another. A potential loss of Federal Reserve independence is another major bearish factor for the U.S. currency.
The red and blue lines on the indicator still indicate a retained bullish bias. In the latest reporting week, long positions from the "Non-commercial" group decreased by 800 contracts, while short positions increased by 2,600 contracts. As a result, the net position fell by 3,400 contracts.
EUR/USD 1-Hour Chart Analysis
On the hourly timeframe, EUR/USD continues to form a downward movement, though it cannot yet be classified as a completed trend shift. The price remains sideways and has not broken through the 1.1750–1.1760 zone or the Senkou Span B line. We still don't see compelling reasons for significant dollar strength, and the price also remains above the 1.1657–1.1666 area. The daily chart indicates that the larger uptrend remains in place.
For October 8, we highlight the following key trading levels: 1.1234, 1.1274, 1.1362, 1.1426, 1.1534, 1.1604–1.1615, 1.1657–1.1666, 1.1750–1.1760, 1.1846–1.1857, 1.1922, 1.1971–1.1988. Also watch Senkou Span B (1.1782) and Kijun-sen (1.1715). The Ichimoku indicator lines may shift throughout the day, so be aware of this when using them to evaluate signals. Don't forget to place your Stop Loss at breakeven once the price has moved 15 pips in the desired direction — this will help protect against false breakouts.
On Wednesday, ECB President Christine Lagarde will deliver another speech in the Eurozone, but we do not expect anything new or impactful. She's already spoken about the inflation data, and the current level is acceptable to the ECB. Germany is set to release a minor industrial production report, while in the U.S., the minutes from the latest Federal Reserve meeting will be published.
Trading Recommendations
On Wednesday, traders can look to trade within the 1.1657–1.1666 zone. If this level is broken on the fourth or fifth attempt, short positions become valid with a target of 1.1604–1.1615. If the price bounces again from this level, long positions can be considered, aiming for 1.1715 and 1.1750–1.1760.
Chart Notes
Support and resistance price levels — thick red lines where price movements may end. These are not used as signal generators.
Kijun-sen and Senkou Span B — Ichimoku indicator lines, transferred from the 4-hour timeframe to the hourly chart. These are considered strong reference lines.
Extreme levels — thin red lines marking areas where the price has previously bounced. These can act as signal areas.
Yellow lines — trendlines, trend channels, and other technical patterns.
COT Chart Indicator 1 — shows the net positions held by different categories of traders.
