EUR/USD 1H
The EUR/USD pair continued a rather weak downward movement and managed to overcome the Senkou Span B line on the hourly timeframe on on June 17. Thus, traders continue a confident, but weak, downward movement exactly in the middle of the descending channel. The first goal is still the support level of 1.1171. The first upward trend line runs near that level, which still leaves the bulls with a high chance of resuming the upward trend. If the quotes of the pair rebound off this line, then the upward movement may resume, and we will expect a signal in the form of overcoming the downward channel. At the same time, if the bears manage to overcome the trend line, the pair will get the opportunity to drop another 250 points, to the second upward trend line. We still believe that the downward movement is more likely.
EUR/USD 15M
Both linear regression channels are directed downward on the 15-minute timeframe, clearly signaling a downward trend in the short term. There are currently no signs of a possible turn up.
COT Report
The European currency continued to rise in price for most of the past week. Thus, we made assumptions that professional market players invested in the euro, respectively, according to the latest COT report, the number of buy positions should have seriously increased. Or the number of contracts for selling the euro will significantly decrease. As a result, the report showed the implementation of the first option. The number of open buy positions increased by 12,662, while sales contracts were also reduced by professional traders (-2,579). Thus, even a double effect was obtained. As for the general changes among all categories of traders in the COT report, the number of sell deals has grown over the past week. However, we all perfectly understand that speculators drive the market, and accordingly, their actions interest us. The trend is already different in the new week. Speculators stopped opening new contracts for the purchase.
The general fundamental background for the EUR/USD pair remains neutral, from our point of view. Federal Reserve Chairman Jerome Powell made two speeches in the US Congress over the past two days, however, if traders responded with restrained purchases of the dollar on Tuesday, then there was no reaction yesterday. In principle, Powell did not disclose anything of paramount importance to either the Banking Committee or the House of Representatives. It is obvious that the Fed will use the full range of tools available to it in order to overcome the coronavirus crisis as quickly and as fully as possible. Obviously, until a cure for the COVID-2019 virus can be found, stiffness and restraint in their activity will be observed among the population of any country. Several people will not go to cinemas, gyms, and other crowded places, even if they are open, being banal afraid of getting sick. This is especially true for older people and overweight people or children. They, as well as their relatives, will not travel to other countries and take vacations for trips to the sea. Thus, limiting their access to people to a minimum. Consequently, certain categories of people will spend less, and those who have lost their jobs in recent months will be preoccupied with finding a new one and, naturally, will also spend less. This will hinder US economic expansion. Traders continue to vigorously ignore the usual macroeconomic reports.
Based on the foregoing, we have two trading ideas for June 18:
1) So far, the bulls have released the initiative from their own hands, so the EUR/USD pair may continue the downward movement. Since the Senkou Span B line has been overcome, we recommend that you stay in sales with a target support level of 1.1171. If the bears manage to overcome the upward trend line, then short positions can be maintained with the support levels of 1.1088 and 1.0962 with targets. Potential Take Profit range from 65 to 270 points.
2) We recommend considering the option of resuming growth of the EUR/USD pair if the bulls manage to return to the area above the critical Kijun-sen line, as well as above the resistance area of 1.1327-1.1341 and, as a result, after consolidating above the downward channel. Then we will recommend buying the euro with targets at resistance levels of 1.1380 and 1.1506. Potential Take Profit in this case is from 30 to 160 points.
