Analysis of EUR/USD 5M

EUR/USD traded flat on Tuesday. Volatility slightly increased, but what difference does it make when the price continues to move strictly sideways? The dollar edged up in the afternoon, but why does it matter if the pair is still stuck in a flat phase? The two economic reports from the US were clearly secondary of importance, but their values suggested a potential decline in the dollar. But the dollar did not fall. In fact, it appreciated in value. Therefore, there was no logic in the pair's movements, and it still remains elusive. US industrial output fell by 0.5%, while retail sales increased by 0.2%.

There were several entry points on Tuesday. Initially, the pair bounced off the level of 1.1274, afterwards it fell to the nearest target at 1.1234. Traders could have made around 20 pips on a short position. The bounce from the level of 1.1234 should have been interpreted as a buy signal, and the pair even came close to returning to 1.1274 (falling short by just 3 pips). However, it was possible to close this trade without waiting for a clear target hit. The next signal formed during the US session when the pair breached the 1.1234 level. Afterwards, the pair fell by another 10-15 pips. Thus, a profit of 30-55 pips, which is a very good result amidst a flat.

COT report:

On Friday, a new COT report for July 11 was released. In the last 10 months, COT reports fully corresponded to what is happening in the market. The chart above clearly shows that the net position of major traders (the second indicator) began to grow in September 2022 and at about the same time the euro started climbing too. In the last 5 months, the net position has not risen but the euro remains at very high levels. At the moment, the net position of non-profit traders is bullish. The euro keeps climbing against the US dollar.

I have already mentioned the fact that a fairly high value of the net position signals the end of an uptrend. This is also confirmed by the first indicator where the red and green lines are very far from each other. Usually, it precedes the end of the trend. During the last reporting week, the number of long positions of the non-commercial group of traders increased by 3,000 and the number of short ones- by 5,700. The net position declined by 2,700 positions. The net position is falling, while the euro is growing. This is illogical. The number of long positions is higher than the number of short ones of non-commercial traders by 140,000. This is a very large gap as the difference is almost threefold. Even without COT reports, it is obvious that the euro should decline but speculators are still in no hurry to sell it.

Analysis of EUR/USD 1H

On the 1H chart, the euro/dollar pair continues to grow almost non-stop. I believe that traders have started a new sell-off of the US dollar. Economic reports have practically no effect on its movements. There is no need to build a trend line as the bullish sentiment is too strong. There are no clear support levels. In the past few days, we have witnessed a flat phase.

On July 19, traders should pay attention to the following key levels: 1.0806, 1.0868, 1.0943, 1.1012, 1.1092, 1.1137, 1.1185, 1.1274, 1.1321, 1.1391, as well as the Senkou Span B (1.1038) and Kijun-sen (1.1203) lines. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. Traders look for signals at rebounds and breakouts. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 15 pips. This will protect against possible losses if the signal turns out to be false.

The EU will release inflation data for June in the final estimate, which will hardly be different from the initial assessment. Therefore, this report is not considered important. In the US, there are several secondary reports that are capable of causing a reaction of around 20-30 pips at most. Most likely, we should brace ourselves for another low-volatility day or a flat market.

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.