EUR/USD 1H
The euro/dollar pair, after an unsuccessful attempt to overcome the support area of 1.1702-1.1727, rebounded off it, rose to the Kijun-sen line, rebounded from it and resumed its downward movement, returning to the 1.1702-1.1727 on the hourly timeframe on August 4. However, the second attempt to overcome the indicated support area was unsuccessful, and at the moment the pair rebounded off it again. Thus, we believe that the bears are now continuing to exert moderate pressure on the pair, but this pressure is not yet enough for the dollar to continue to rise in price. We are still leaning towards the option in which the dollar would continue to grow, however, until overcoming 1.1702, this option remains hypothetical.
EUR/USD 15M
The lower linear regression channel managed to turn up on the 15-minute timeframe due to the pair's growth from yesterday afternoon. However, we do not believe that this implies the birth of a new upward trend. The latest Commitments of Traders (COT) report showed a significant increase in bullish sentiment among major traders. The category of non-commercial traders opened 36,000 new Buy-contracts during the reporting week (July 22-28). This category has opened only 3,700 Sell-contracts. Thus, the net position (the difference between purchases and sales) immediately increased by 32,000, which indicates a sharp strengthening of the bullish mood. However, this was obvious even without the COT report, as the euro continued to grow non-stop over the past four weeks. As for other categories of traders, their actions in the currency market do not matter much now. The most interesting thing now is what will be the actions of professional traders according to a new report that will be released this Friday. After all, the euro began to decline, respectively, the number of open new Buy-contracts should decrease, and the number of Sell-contracts should increase. This will be a sign that major traders are preparing for a new downward trend.
The fundamental background for the EUR/USD pair remained practically unchanged on Tuesday. Neither economic nor political news came from the European Union and America throughout the day. Therefore, traders had nothing to react to, which, in fact, they did, continuing to trade the pair according to the corrective scenario. On Wednesday, the situation on the foreign exchange market should be more interesting, since there will be several rather important macroeconomic reports in both Europe and America. We are now betting that both the euro and the pound should continue to fall. This means that you should work with any macroeconomic data that will be in favor of the US dollar, and the rest of the data should be ignored. Unfortunately, there is little hope that market participants will seriously work out business activity indices in the EU and US service sectors. Just like retail sales in the European Union. The only thing that can cause a rather tangible reaction is the ADP report on changes in the number of employees in the US private sector. And here we should rather expect a weaker than the forecast value, rather than vice versa. If this is the case in reality and traders again begin to get rid of the US currency, this will mean that all is not lost for the pair's buyers and the upward trend may still resume. But the sellers are not showing their best so far and are frankly weak.
Based on all of the above, we have two trading ideas for August 5:
1) Buyers gave the bears an opportunity to start implementing their ideas. However, so far, sellers do not take too many chances. Buy orders remain relevant for the target resistance level of 1.1911, but now the bulls need to return to the area above the Kijun-sen line (1.1803), which will mean a possible resumption of the upward trend. The potential Take Profit in this case is about 90 points.
2) Bears have made a good first step towards a new downtrend, which, from our point of view, is still very likely. Now it is vital for them to overcome the support area of 1.1702-1.1727 and continue to open short positions while aiming for the support level of 1.1644, Senkou Span B line (1.1606) and support level of 1.1509. The potential Take Profit in this case is from 40 to 160 points.
