Analysis of EUR/USD 5M
EUR/USD moved by 30 pips on Thursday. Despite nearly zero volatility and the observance of Independence Day in the US, the euro continued to gradually rise. Once again this is a situation where the market doesn't care much about having any reason to buy the euro and sell the dollar. We can understand the dollar falling on weak ADP and ISM reports on Wednesday, but then again even those reports weren't all that bad. However, on Thursday, no significant news was released, aside from minor data that comes in large quantities every day.
From a technical standpoint, we see a completely logical upward movement. The price failed to break through the 1.0658-1.0669 area thrice, after which a new short-term upward trend began. A trend line has formed, and the price has been rising almost every day. This week, it was logical for the dollar to fall since most of the US data failed to show results that would encourage the market to buy the greenback. However, we want to remind you that the Federal Reserve maintains a hawkish monetary policy, and currently US inflation doesn't even allow considering a rate cut in the near future. Nevertheless, it seems the market has fully shifted its focus to the state of the American economy. The economy is slowing down, which means it's time to get rid of the dollar. We believe that there is little logic behind the euro's recent growth.
The pair formed one trading signal on Thursday. The euro surpassed the 1.0797 level, after which it managed to climb another 10 pips. Thus, formally, traders could have opened a long position and earned 10 pips.
COT report:
The latest COT report is dated June 25. The net position of non-commercial traders has remained bullish for a long time and remains so. The bears' attempt to gain dominance failed miserably. The net position of non-commercial traders (red line) has been declining in recent months, while that of commercial traders (blue line) has been growing. Currently, they are approximately equal, indicating the bears' new attempt to seize the initiative.
We don't see any fundamental factors that can support the euro's strength in the long term, while technical analysis also suggests a continuation of the downtrend. Three descending trend lines on the weekly chart suggests that there's a good chance of further decline. In any case, the downward trend is not broken.
Currently, the red and blue lines are approaching each other, which indicates a build-up in short positions on the euro. During the last reporting week, the number of long positions for the non-commercial group decreased by 4,100, while the number of short positions increased by 12,300. As a result, the net position decreased by 16,400. According to the COT reports, the euro still has significant potential for a decline.
Analysis of EUR/USD 1H
On the 1-hour chart, EUR/USD failed to break through the 1.0658-1.0669 area and decided not to waste time in vain, thus forming a new upward trend. At the moment, we have an ascending trend line, above which the upward trend persists. However, it may end as early as Friday if the Nonfarm Payrolls and unemployment reports in the US turn out to be better than the ADP and ISM reports. However, under current circumstances, the dollar can only hope for a short-term rise in the form of a correction, nothing more.
On July 5, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0797, 1.0836, 1.0889, 1.0935, 1.1006, 1.1092, as well as the Senkou Span B line (1.0714) and the Kijun-sen line (1.0755). The Ichimoku indicator lines can move during the day, so this should be taken into account when identifying trading signals. Don't forget 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 if the signal turns out to be false.
On Friday, the Eurozone retail sales report will be published. US reports on Nonfarm Payrolls and unemployment reports will be in focus. In addition, European Central Bank President Christine Lagarde will speak. Most likely, the market will try to look for reasons to buy the euro and sell the dollar. If the US data turn out to be stronger than forecasts, the market will try its best to avoid a sell-off.
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;
