EUR/USD on M5
During the last trading day of the week, the EUR/USD pair once again did not show the movements we expected. Given the strong macroeconomic background on Friday and the market's relatively weak reaction to the ECB and Federal Reserve meetings, one could have expected stronger and, more importantly, trend-driven movements. However, the day followed a familiar pattern. Following the release of a fairly decent set of statistics in the US, the greenback rose by about 50 pips, but by the end of the day, it had lost much more and eventually depreciated. Although it was a relatively small decline, it was yet another chance for the American currency to grow, which it once again failed to take advantage of. The US unemployment rate declined once again, and nonfarm payrolls for April exceeded forecasts. However, the nonfarm payrolls reading for March was revised downward, but this is less important.
Last week, proper trading signals were hard to get. On the 1-hour chart, the pair is again swinging back and forth or trading flat in other words. Consequently, the Ichimoku indicator lines are currently weak, and false signals are forming around them. On Friday, the price first consolidated below both lines and then above them. In the first case, traders should not have opened a sell position as the signal was formed precisely at the time when the US data was published. In the second case, the signal was formed too late. There were only a few hours left until the market closed for the weekend.
COT report
On Friday, a new COT report was released for May 2. In the past 8-9 months, the COT report data has been completely in line with market developments. The illustration above clearly shows that the net position of large market players (second indicator) began to grow in September 2022. Around the same time, the European currency also began to appreciate. Currently, the net position of the non-commercial group of traders remains bullish and so does the position of the European currency, which is hesitating to develop a proper downward correction.
We have previously drawn your attention to the fact that a relatively high net position value suggests a possible end of the uptrend. This is signaled by the first indicator where the red and green lines have moved significantly away from each other, which often precedes the end of a trend. The European currency attempted to start a decline, but we only saw a simple pullback. During the last reporting week, the number of Buy contracts in the non-commercial group of traders increased by 3,300, while the number of Sell contracts decreased by 700. Accordingly, the net position grew again by 4,000 contracts. The number of BUY contracts is higher than the number of SELL contracts among non-commercial traders by 174,000, which is very significant. The difference is almost threefold. A correction is still overdue, so even without COT reports, it is clear that the pair should start falling. However, we still only see an upward movement.
EUR/USD on H1
On the 1 hour chart, the pair continues to exhibit strange and incomprehensible movements. Last week, the fundamental and macroeconomic background was very strong, and there was some good news for the US dollar. However, the US currency once again failed to appreciate, the ascending trend line was broken for the second time, and the price continued to move in a sideways channel, holding near its upper boundary. The Ichimoku indicator lines are currently weak, and the euro currency is still trading too high. It is overbought and unable to start a correction.
On Friday, we highlighted the following trading levels: 1.0762, 1.0806, 1.0868, 1.0943, 1.1092, 1.1137-1.1185, 1.1234, 1.1274, as well as the Senkou Span B at 1.1007 and Kijun-sen at 1.1017. The Ichimoku indicator lines may move during the day, which should be taken into account when determining trading signals. There are also additional support and resistance levels, but no signals are forming around them. Rebounds and breakouts of these lines will also serve as signals. Do not forget to set a Stop Loss order at breakeven if the price has moved in the right direction by 15 pips. This will protect you against possible losses if the signal turns out to be false.
On May 8, no important events or publications are scheduled in the European Union or the United States. Germany will release a report on industrial production for March, which is unlikely to cause a reaction of more than 20 pips. In any case, the pair continues to trade in a swing mode.
On the chart:
Support and resistance levels are bold red lines at which the price movement may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines plotted on the 1-hour time frame from the 4-hour chart. They are considered strong levels.
Extremum levels are thin red lines from which the price has previously rebounded. They provide trading signals.
Yellow lines are trendlines, trend channels, or other technical patterns.
Indicator 1 on the COT chart is the size of the net position of each category of traders.
Indicator 2 on the COT chart is the size of the net position for the non-commercial group of traders.
