EUR/USD 5M Analysis
The EUR/USD currency pair traded ultra-weakly for most of the day on Wednesday, then collapsed in the second half. Of course, "collapsed" is a strong term, as the total decline was about 50 pips. However, even this drop looked significant against the background of movements in recent weeks and months. As for the causes of the euro's decline and the U.S. dollar's rise, the situation is quite complex.
In the morning, the Eurozone published the second estimate of October inflation, which matched both the forecasts and the first estimate. Thus, it did not trigger the drop in the pair. In the evening, the U.S. released the FOMC minutes, a formal document, but the decline began about 5 hours before its release. Additionally, a UK inflation report raised expectations that the Bank of England would ease monetary policy at its upcoming meeting, but the drop did not occur in the morning, but during the U.S. trading session. In general, the British pound could theoretically pull the euro down, but this explanation seems like an excuse.
From a technical perspective, a new downward trend may begin on the hourly timeframe, as the price crossed below the Senkou Span B line yesterday. Today, reports on Non-Farm Payrolls and the unemployment rate will be released in the U.S., making it extremely difficult to predict where the pair will end up by the end of the day. Within a single day, the euro could show a decline without issue, but global factors continue to point only upward.
On the 5-minute timeframe, two trading signals were formed yesterday. First, the price bounced off the Senkou Span B line, and then it broke through and reached the nearest target at 1.1534. Thus, the second sell trade was profitable, while the first one closed at a Stop Loss for breakeven.
COT Report
The latest COT report is dated September 23. Since then, no further COT reports have been published due to the U.S. "shutdown." In the illustration above, it is clear that the net position of non-commercial traders has long been "bullish," with bears struggling to gain the upper hand at the end of 2024 but quickly losing it. Since Trump took office for a second term as President of the U.S., the dollar has been falling. We cannot assert that the decline of the American currency will continue with 100% probability, but current world events suggest that this may be the case.
We still do not see any fundamental factors that would strengthen the euro, while there remain sufficient factors that would weaken the dollar. The global downtrend is still ongoing, but what difference does it make where the price moved in the last 17 years? Once Trump concludes his trade wars, the dollar may start to rise, but recent events indicate that the war will continue in one form or another for a long time yet.
The position of the red and blue lines of the indicator continues to indicate the preservation of a "bullish" trend. During the last reporting week, the number of long positions in the "Non-commercial" group decreased by 800, while the number of shorts increased by 2,600. Consequently, the net position decreased by 3,400 contracts over the week. However, this data is already outdated and holds no significance.
EUR/USD 1H Analysis
On the hourly timeframe, the EUR/USD pair continues to form a new upward trend, but it is on the verge of cancellation. The price remains within the sideways channel of 1.1400–1.1830 on the daily timeframe, so a rise in the euro to 1.1800 can still be expected within the framework of a local trend. However, for this movement to occur, the price must once again consolidate above the Senkou Span B line.
For November 20, the following levels are highlighted for trading: 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, and also the Senkou Span B line (1.1563) and Kijun-sen (1.1596). The Ichimoku indicator's lines may move throughout the day, which should be taken into account when determining trading signals. Remember to set a stop-loss order to breakeven if the price moves in the correct direction by 15 pips. This will protect against potential losses if the signal turns out to be false.
No significant events or reports are scheduled in the Eurozone for Thursday, while reports that the market has been waiting for one and a half months—unemployment rate and Non-Farm Payrolls—will come out in the U.S. Therefore, high volatility may be observed in the second half of the day.
Trading Recommendations:
On Thursday, traders may open long positions if the price consolidates above the Senkou Span B line, targeting 1.1604–1.1615. Short positions will become relevant if the price consolidates below 1.1534, with a target at 1.1426. However, it should be remembered that movements during the American session will depend 100% on the labor market data.
Explanations for Illustrations:
- Support and resistance price levels are shown as thick red lines, near which the movement may end. They are not sources of trading signals.
- Kijun-sen and Senkou Span B lines are lines from the Ichimoku indicator transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
- Extreme levels are thin red lines from which the price previously bounced. They are sources of trading signals.
- Yellow lines are trend lines, trend channels, and any other technical patterns.
- Indicator 1 on COT charts represents the size of each category of traders' net position.
