Analysis of EUR/USD on 5-minute timeframe
EUR/USD carried on with its decline in the first half of the trading day on Monday, which we, indeed, expected. Yesterday, no economic data was scheduled in the European Union and the United States. The only event worthy of note was a speech by Christine Lagarde. As we warned, Lagarde did not say a word about monetary policy or interest rates because the topic of her speech was simply different. She expanded mainly on the rivalry between China and the United States and the possible growth of global inflation to 5% due to this confrontation. It is hard to say whether traders paid attention to Lagarde's remarks, but we believe that EUR/USD would have continued its downward movement even without them. The euro currency remains extremely overbought, has no fundamentals for further growth, and should have developed a new strong downward correction long ago. Therefore, we believe that the pair should decline over the next few weeks.
As for trading signals, there were few on Monday. First, the pair broke through the critical line, and then the 1.0926 level. Both signals were generated during the New York session. As soon as the first signal appeared, the price immediately found itself near the nearest target level. The second signal could be worked out, but it brought neither profit nor loss.
COT report
On Friday, a new COT report for April 11 was released. The CFTC has caught up with the lost time and is now publishing reports that correspond to the current time period. Over the past 6-7 months, the picture has fully corresponded to what is happening in the market. In the picture above, it is clear that the net position of large players (second indicator) has been growing since the beginning of September 2022. Around the same time, the European currency began to strengthen. At the moment, the net position of non-commercial traders remains "bullish" and very high, just like the forex rate of the European currency, which cannot even properly correct downwards. We have already drawn traders' attention to the fact that a fairly high "net position" reading indicates that the uptrend is about to complete soon. This is signaled by the first indicator, where the red and green lines have moved far away from each other, which often precedes the end of the trend. The European currency has tried to reverse downwards, but so far we have only seen a minor pullback downwards. During the last reporting week, the number of Buy contracts for the "Non-commercial" group increased by 18.7K, while the number of shorts decreased by 1.2K. Accordingly, the net position has increased significantly. The number of BUY contracts is higher than the number of SELL contracts for non-commercial traders by 164K. The correction is still overdue, so even without COT reports, it is clear that EUR/USD should start a new decline. For the time being, we're watching only its growth.
Analysis of EUR/USD on 1H timeframe
On the 1-hour timeframe, EUR/USD is extending an uptrend. This is proven by its location above the trendline and above the Senkou Span B line. Even despite a rather strong pullback on Friday and Monday, nothing has changed in terms of technical analysis. The US dollar still finds it very difficult to assert its strength, which is very strange and surprising, as there are no strong fundamentals for the euro to grow. For Tuesday, we highlight the following trading levels — 1.0658-1.0669, 1.0762, 1.0806, 1.0868, 1.0926, 1.1033, 1.1137-1.1185, 1.1234, 1.1274, as well as the Senkou Span B (1.0882) and Kijun-sen (1.0994) lines. The Ichimoku indicator lines may move during the day, which should be taken into account when determining trading signals. There are also interim support and resistance levels, but no signals are formed around them. Signals can be "bounces" and "breakthroughs" of extreme levels and lines. Don't forget to set a Stop Loss order at breakeven if the price has moved in the right direction by 15 points. This will protect against possible losses if the signal turns out to be false. On April 18, the economic calendar for the European Union and the United States is also empty. No events are planned. Only at night (i.e., already on April 19), Elderson from the ECB and Michelle Bowman, a member of the Board of Governors of the Federal Reserve, will make their remarks, but they will not have any impact on the pair's movements during today's trading session. We believe that the instrument may continue to decline towards the Senkou Span B.
Comments on charts
Support and resistance price levels (resistance/support) are thick red lines around which the price may stop its move. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines are Ichimoku indicator lines transferred to the 1-hour timeframe from the 4-hour timeframe. They are strong lines.
Extreme levels are thin red lines from which the price previously bounced. They are sources of trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on COT charts means the size of the net position for each category of traders. Indicator 2 on COT charts means the size of the net position for the "Non-commercial" group.
