Analysis of EUR/USD 5M
EUR/USD traded flat with low volatility. Therefore, there was no point in entering the market on Friday. Of course, it was quite difficult to recognize the flat after a fairly decent trend on Thursday. However, it became clear during the European session that traders had left early for the weekend.
To be honest, the market's behavior was quite strange. The US released two interesting reports on Friday. And although their values contradicted each other and the reports themselves were not crucial, they were not useless at all. Nevertheless, the market decided otherwise. We can't call it a logical move, but the market has been having significant issues with logic lately.
From a technical perspective, the pair has started to form a new downtrend, so we can expect the euro to fall. However, take note that the Federal Reserve meeting can have a significant influence on the pair's movement. Although we do not expect any important decisions from the US central bank, it is always advisable to have a backup plan in case of any surprises.
And the surprise could only come from Fed Chief Jerome Powell. If, for example, Powell suddenly starts talking about rate cuts, the dollar could plummet. There are no grounds for such a scenario, but it cannot be ruled out.
There is no point in considering Friday's trading signals, as the pair moved sideways all day. A buy signal was formed during the European session, but traders had enough time to realize that it was a flat market and so they left without losses.
COT report:
The latest COT report is dated March 12. The net position of non-commercial traders has been bullish for quite some time. Basically, the number of long positions in the market is higher than the number of short positions. However, at the same time, the net position of non-commercial traders has been decreasing in recent months, while that of commercial traders has been increasing. This shows that market sentiment is turning bearish, as speculators are increasing the volume of short positions on the euro. We don't see any fundamental factors that can support the euro's growth in the long term, while technical analysis also suggests a downtrend. Three descending trend lines on the weekly chart indicate that there's a good chance of extending the decline.
At present, the red and blue lines are moving towards each other (indicating a trend reversal after a rise). Therefore, we believe that the euro will fall further. During the last reporting week, the number of long positions for the non-commercial group decreased by 6,000, while the number of short positions decreased by 14,100. Accordingly, the net position increased by 8,100. The number of buy contracts is still higher than the number of sell contracts among non-commercial traders by 74,000 (previously 66,000).
Analysis of EUR/USD 1H
On the 1-hour chart, EUR/USD may initiate the long-awaited downtrend, which could take the price far down. Currently, the lower boundary of the Ichimoku cloud - the Senkou Span B line - will be extremely important. A breakthrough will pave the way for the pair to fall further, which is what we are counting on. However, Friday did not provide us with an answer to the question of whether the pair managed to breach this line. Therefore, we should now rely solely on the trend line.
On March 18, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0823, 1.0889, 1.0935, 1.1006, 1.1092, as well as the Senkou Span B line (1.0888) and the Kijun-sen (1.0918). 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 Monday, there are no significant events planned in the US. The second estimate for Eurozone inflation will be published, which is objectively much less important than the first. Therefore, we do not expect a strong market reaction to this report. We should probably expect another flat phase or very weak movement on Monday.
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;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
