Analysis of EUR/USD 5M
EUR/USD continued its sluggish downward movement on Friday, although the volatility was so low that calling it a "movement" seems inaccurate. However, market participants have long been accustomed to a 20-30 pip movement in one direction in a single day, which is already a cause for celebration. It might appear that the price is moving sharply enough on higher timeframes, but this is an optical illusion. Often, the chart scale adjusts itself to fit the terminal window. If it did not change, movements would now have to be scrutinized under a microscope.
On Friday, there were no significant events in the Eurozone or the US, hence the absence of market movements. On Thursday, the European Central Bank meeting and ECB President Christine Lagarde's speech took place, and movements were practically nonexistent, too. The euro started to decline reluctantly, but how long will it continue? Those who have been reading our articles for a while know that we advocate for the euro's decline, as we believe that the fundamental background does not support further appreciation of the euro. Thus, overcoming the trend line in the hourly timeframe would signify a downward trend.
There were absolutely no notable trading signals on Friday. The pair formed a sell signal near the critical line days ago, and we remember that with the current volatility, trades sometimes have to be held for two to three days. Otherwise, traders cannot achieve profits in the market right now. By the end of Friday, the price had fallen by another ten pips. By Wednesday, it will likely continue to fall to the level of 1.0836...
COT report:
The latest COT report is dated July 16. The net position of non-commercial traders has remained bullish for a long time. The bears' attempt to gain dominance failed miserably. In recent months, the net position of non-commercial traders (red line) has been declining, while that of commercial traders (blue line) has been growing. They are now approximately equal, indicating a new attempt by the bears to take the initiative.
We still do not see any fundamental factors that can support the euro to strengthen further, and technical analysis indicates that the price is in a consolidation zone—within a triangle. The future movement of the pair will depend on which boundary the price leaves through.
The red and blue lines are approaching each other, indicating a build-up in short positions in the euro. During the last reporting week, the number of long positions for the non-commercial group increased by 14,100, while the number of short positions decreased by 7,000. As a result, the net position increased by 21,100. According to the COT reports, the euro has a significant potential for a decline.
Analysis of EUR/USD 1H
On the hourly timeframe, EUR/USD continues to form an uptrend. We currently have an ascending trend line, above which the upward trend remains intact. All the economic reports from the past three weeks had a detrimental effect on the dollar, even when the data were favorable to the dollar. Meanwhile, the global downtrend persists on the 24-hour timeframe, meaning the pair could still fall back to the 1.06 level.
On July 22, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0797, 1.0843, 1.0889, 1.0935, 1.1006, 1.1092, as well as the Senkou Span B line (1.0830) and Kijun-sen line (1.0910). The Ichimoku indicator lines may shift throughout the day, which should be considered when identifying trading signals. Remember 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 in case of false signals.
No significant events are scheduled in the Eurozone or the United States on Monday. Therefore, the pair may experience low volatility today, and the euro may continue to edge lower gradually. A decline is still the most logical scenario for the euro. In the 24-hour timeframe, the pair bounced off the significant level of 1.0940 (50.0% Fibonacci). The price is also at the upper boundary of the horizontal channel on the same intraday timeframe.
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 are strong lines.
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;
