Analysis of EUR/USD 5M

On Tuesday, EUR/USD started a corrective move but couldn't manage to hold for long and then it turned downwards. At the end of the day, despite rising by 80 pips, the euro managed to depreciate. This aligns with our expectations. We've repeatedly mentioned that the pair might form several phases of the bullish correction, but it lacks the prospects for significant growth. This is exactly what we are observing at the moment. The euro is desperately trying to correct higher, but it quickly falls back down. Yesterday, it was undoubtedly aided by the eurozone Q3 GDP report. It turned out that the indicator contracted by 0.1%, which the market didn't anticipate. Therefore, the euro fell, even with a decent inflation figure for October. Perhaps the market worked out the inflation data itself, which slowed down more than expected. However, earlier, the euro rose on a similar report from Germany.

Regardless, the movements were excellent, and consequently, so were the trading signals. Initially, the pair bounced off the Senkou Span B line and rose to the 1.0658-1.0669 range. You could have earned around 20-30 pips on that trade. Afterwards, there was a rebound from the aforementioned range, and traders should have opened short positions. As a result, the price crossed the Senkou Span B, Kijun-sen, and the 1.0581 level. It was advisable to manually close the trade below them because no other signals were formed. The profit amounted to about 60 pips.

COT report:

On Friday, a new COT report for October 24th was released. Over the past 12 months, the COT report data has been consistent with what's happening in the market. The net position of large traders (the second indicator) began to rise back in September 2022, roughly at the same time that the euro started to rise. In the first half of 2023, the net position hardly increased, but the euro remained relatively high during this period. Only in the last two months, we have seen a decline in the euro and a drop in the net position, which we've been waiting for a long time. Currently, the net position of non-commercial traders is still bullish and this trend is likely to lose momentum soon.

We have previously noted that the red and green lines have moved significantly apart from each other, which often precedes the end of a trend. This configuration persisted for over half a year, but ultimately, the lines have started moving closer to each other. Therefore, we still stick to the scenario that the upward trend is over. During the last reporting week, the number of long positions for the "non-commercial" group increased by 1,200, while the number of short positions fell by 1,600. Consequently, the net position increased by 400 contracts, which means it remained almost unchanged. The number of BUY contracts is still higher than the number of SELL contracts among non-commercial traders by 82,000, but the gap is narrowing. In principle, it is now evident even without COT reports that the euro is set to extend its weakness.

Analysis of EUR/USD 1H

On the 1-hour chart, the pair exhibited three corrective phases, afterwards it sharply turned downward again. Therefore, it appears as if the downtrend has been or will resume shortly. As we've mentioned before, this week features very strong fundamental and macroeconomic factors, so by the end of the week, the price could be anywhere. A fourth corrective phase is entirely possible.

On November 1, we highlight the following levels for trading: 1.0269, 1.0340-1.0366, 1.0485, 1.0530, 1.0581, 1.0658-1.0669, 1.0768, 1.0806, 1.0868, 1.0935, as well as the Senkou Span B (1.0575) and Kijun-sen (1.0598) lines. The Ichimoku indicator lines can shift during the day, so this should be taken into account when identifying trading signals. There are also auxiliary support and resistance levels, but signals are not formed near them. Signals can be "bounces" and "breakouts" of extreme levels and lines. Don't forget to set a breakeven Stop Loss if the price has moved in the right direction by 15 pips. This will protect against potential losses if the signal turns out to be false.

On Wednesday, there are no significant events or reports scheduled in the European Union. From the US, traders may look to the release of reports on business activity in the manufacturing sector, JOLTs job openings, ADP private sector employment, and jobless claims. In the evening, the results of the FOMC meeting will be announced, and Federal Reserve Chairman Jerome Powell will speak.

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 provide trading signals;

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;

Indicator 2 on the COT charts is the net position size for the Non-commercial group.