EUR/USD 1H
Quotes of the EUR/USD pair sharply jumped on the hourly timeframe yesterday, breaking the Senkou Span B line of the Ichimoku indicator on the 4-hour timeframe, and the first resistance level is 1.0886 and the resistance area is 1.0880 - 1.0893. Traders were not able to overcome a long-term ascending trend line for a long period of time, several rebounds were made from it. In general, the bulls finally woke up and made a significant step towards forming a new upward trend. Now, buyers need to stay above the important Senkou Span B line, since after such a strong movement, a downward correction should inevitably follow. So it requires either a rebound from the Senkou Span B line, or a correction + overcoming this line in the future.
EUR/USD 15M
We see a confident upward trend on the 15-minute timeframe, which formed on May 18. The trend is bullish, but after the first trading day of the week, the momentum of buyers has dried up. Now, on the lowest timeframe, we expect the price to consolidate below the moving average line and to systematically move down to the lower border of the older linear regression channel. Near its bottom line or the Senkou Span B line, an upward turn is possible on the hourly timeframe with resuming purchases of the European currency by market participants.
COT report
The latest COT report dated May 12 showed a new decrease in the number of buy and sell transactions among large traders, by 4,781 and by 3,554. Thus, the general mood of large traders remains bullish (the total number of purchase transactions is higher, 549,000 - 521,000), in addition to this, traders still managed to stay above the trend line on the 4-hour timeframe. Also, purchase positions increased among entities engaged in professional activities in the foreign exchange market (+4569 purchase transactions). Thus, the euro can continue the growth process for some time.
As for the fundamental background, it is almost neutral for the pair. A lot of news comes from both the European Union and the United States, however both countries are in more or less the same position, neither the dollar nor the euro has advantages. The macroeconomic background continues to be largely ignored by traders, as both economies are simultaneously declining due to the coronavirus epidemic. Today we advise you not to miss the speech of Federal Reserve Chief Jerome Powell in Congress, although he said everything he could say this weekend in an interview with the American channel. In any case, skipping such an important event is not worth it.
Based on the foregoing, we have two trading ideas for May 19:
1) It is possible for the pair's quotes to grow further, but most likely, traders will need to adjust, afterwards, the main movement will resume. Recall that on the 4-hour timeframe, the EUR/USD pair remains within the 1.0750-1.0990 channel. Thus, the upward movement, towards the April 19 high, is very likely in the current conditions. One way or another, it is advised to buy the pair above the Senkou Span B line with targets at 1.0952 and 1.0990. The potential to take profit is about 35 and 75 points.
2) The second option - bearish - involves the backward consolidation of the pair below the Senkou Span B and Kijun-sen lines. In this case, the upward movement on Monday will be recognized as a random impulse of buyers, not confirmed either technically or macroeconomically. Bears will be able to return the initiative into their own hands and try again to overcome the upward trend line around 1.0800. It is advised to sell the pair while aiming for a trend line below the Kijun-sen line. The potential to take profit while executing this scenario will be 55 points. Any further sales of the pair are possible only below the trend line.
