EUR/USD 5M
The EUR/USD pair was trading more actively on Tuesday than the day before. The price blatantly stood in one place on Monday, but on Tuesday, under the influence of rather interesting macroeconomic statistics and a rather important fundamental background, traders began to be more active. And this one immediately brought a good profit to those who follow our trading recommendations. However, first things first. First of all, it should be noted that the dollar's latest appreciation is highly likely associated with geopolitical tensions in Afghanistan. This is often the case: when tensions rise anywhere in the world or a military conflict breaks out, markets respond by increasing demand for "reserve currency" or "reserve assets." And the dollar is precisely the "reserve currency". It should also be noted that the dollar started rising at the US trading session, but it stood in one place during the European. Thus, it is the Americans who are most worried about the situation in Kabul.
The European Union published a report on GDP for the second quarter (figure "1" in the chart), which traders completely ignored. For the sake of fairness, it should be noted that this is already the second assessment of the indicator and its value did not differ from the first. But the markets responded to a rather weak report on retail sales in the US (number "2" in the chart) by buying the dollar. Retail sales fell by 1.1% m/m in July, although the markets were expecting a reduction of no more than 0.2% m/m. However, it was the dollar that rose in the afternoon. There was no reaction to the report on industrial production (number "3" in the chart). Now let's deal with trading signals. Everything is very simple here, since only one trading signal was generated during the day - to sell at the beginning of the US trading session. Since we cannot conclude that the markets worked out the US retail sales report, the sell signal should have been worked out with a short position. After its formation, the price went down by about 30 points, but failed to reach the nearest target level of 1.1704. Therefore, it was necessary to manually close this deal in the late afternoon at a profit of 30 points.
EUR/USD 1H
The pair's quotes have settled below the upward trend line on the hourly timeframe, so the trend has become downward again. The pair did not overcome the Senkou Span B line, so the bulls showed their weakness again. Unfortunately, at this time, geopolitics and tensions in Afghanistan come out on top for the markets, so the US currency may rise again for some time, although global fundamental factors speak against this. However, we would like to point out one important detail. The pair's quotes stopped falling just around the level of 1.1704 - the last local low. Thus, the bears also do not have enough strength to further pull down the pair.
On Wednesday, we continue to recommend considering trading from important levels and lines. The closest important levels at this time are 1.1612, 1.1704, 1.1756, 1.1852, as well as the Senkou Span B (1.1807) and Kijun-sen (1.1755) lines. The Ichimoku indicator lines can change their position during the day, which should be taken into account when looking for trading signals. Signals can be rebounds or breakthroughs of these levels and lines. Do not forget about placing a Stop Loss order at breakeven if the price moves 15 points in the right direction. This will protect you against possible losses if the signal turns out to be false. The European Union is set to publish an important index of business activity for July, and the Federal Reserve minutes will be published in the US. Unfortunately, there is no guarantee that the markets will somehow work out these events. Regarding the Fed minutes, the probability of ignoring it is 90%, simply because it is extremely rare that these documents contain information that is not yet known to the markets. As for the report on inflation in the European Union, everything will depend on how much the actual value does not correspond to the forecast. The forecast is 2.2% y/y.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP/USD pair.
COT report
The EUR/USD pair fell by 140 points during the last reporting week (August 3-9). Since the European currency has generally fallen in recent weeks, it is not surprising that the Commitment of Traders (COT) report showed that the bullish sentiment has weakened among professional traders. However, the euro/dollar pair has been declining in recent weeks very reluctantly, and major players have massively stopped closing buy contracts and open sell contracts. A group of non-commercial traders opened 11,000 Buy-contracts (longs) and 18,000 Sell-contracts (shorts) during the reporting week. Thus, the net position for professional players decreased by another 8,000. However, the indicators below the chart show that although the net position continues to decline, the rate of its decline is decreasing. In addition, as we have already said, the euro dropped to the level of 1.1700, around which the probability of an upward reversal is very high. The first indicator shows that the green and red lines (net positions of the "non-commercial" and "commercial" groups) continue to move towards each other, which means the continued weakening of the upward trend. Recall that when the lines begin to narrow, it means the end of the current trend. However, at the same time, the situation on the chart looks just like a correction. Thus, we believe that at this time, both indicators are signaling exactly a correction. As before, we must not forget that the Federal Reserve has not yet completed the quantitative stimulus program, thanks to which the US economy continues to be pumped with money, which provokes an increase in inflation and an increase in the supply of the dollar in the foreign exchange market. Therefore, we are still expecting a new round of decline in the dollar. The sentiment of the major players remains bullish as the total number of buy contracts still exceeds the number of sell contracts.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the non-commercial group.
