EUR/USD 5M analysis.
During the third trading day of the week, the EUR/USD pair unexpectedly and sharply increased by 200 points. The upward movement began from the very night and only intensified in the European trading session. Remarkably, there was no important news or events on Wednesday. The currency pair has grown almost for no reason. This means that in the next few days the fall may resume to "close" this groundless growth. Of course, this could be the reaction of the market today "in advance". Recall that today, there will be important events in the United States, in the EU, and even in Turkey, where negotiations between the Foreign Ministries of Ukraine and the Russian Federation will take place. It is possible that on the eve of these events or due to insider information, major players have become more active in the direction of purchases of the euro currency. But in any case, when the reasons do not lie on the surface, it is very difficult to say with certainty why this movement happened.
As for trading signals, there were three of them today. The first one turned out to be false: the price bounced from the extreme level of 1.0990 and the Kijun-sen line but managed to go down only 20 points, which, however, was enough to set the Stop Loss to breakeven, so no loss was received on this transaction. Then the price was fixed above the level of 1.0990, so traders could already open long positions. And after overcoming the level of 1.1057 - keep them open. They should have been closed manually in the evening since by that time the fuse of the bulls had dried up. As a result, it was possible to earn about 75 points on this transaction.
COT Report:
The new COT report, which was released on Friday, showed a new strengthening of the "bullish" mood among professional traders. This time, the Non-commercial group has opened about 16 thousand contracts for purchase and 6.8 thousand contracts for sale. Thus, the net position increased by another 9 thousand, which is visible on the second indicator in the illustration above. The total number of purchase contracts exceeds the number of sale contracts by 70 thousand, so now we can say that a new upward trend is beginning to form. The only problem is that the euro continues to fall, and not grow. And this is an absolute divergence. What are we observing now? We observe that the demand among major players for the euro currency is growing, but at the same time, the euro currency itself is falling. What does this mean? This means that the demand for the US currency is growing at a much faster pace. After all, COT reports reflect exactly the demand for the euro currency, not taking into account the dollar. And the dollar is now used by the whole world as a reserve currency. In a difficult geopolitical situation, the demand for the dollar is only growing, which is why we are seeing such a picture. Based on this, we can conclude that now COT reports cannot be considered to predict the further movement of the euro/dollar pair. These reports simply do not coincide with what is happening in the market itself. Therefore, we need to wait for the resolution of the geopolitical conflict in Eastern Europe.
EUR/USD 1H analysis.
The impressive somersault of the European currency on Wednesday is also clearly visible on the hourly timeframe. The price is now moving towards a downward trend line, but we do not expect that the euro currency will be able to show serious growth for two days in a row. Therefore, the fall is likely to resume today, unless the fundamental background provides unexpected support to the euro currency. On Wednesday, we allocate the following levels for trading - 1.0767, 1.0990, 1.1057, 1.1144, 1.1234, 1.1274, 1.1321, as well as the Senkou Span B (1.1228) and Kijun-sen (1.0952) lines. There are also auxiliary support and resistance levels, but no signals will be formed near them. The lines of the Ichimoku indicator may change their position during the day, which should be taken into account when searching for trading signals. Signals can be "bounces" and "overcoming" levels-extremes and lines. Do not forget about placing a Stop Loss order at breakeven if the price went in the right direction of 15 points. This will protect against possible losses if the signal turns out to be false. On March 10 in the European Union, the central bank will summarize the results of the second meeting this year. We do not expect important decisions from the ECB, but Christine Lagarde can make important statements. Also, the reaction of traders may follow an important report on inflation in the United States. Also, we should not forget about the geopolitical background, since it is also of great importance now.
Explanations to the illustrations:
Price levels of support and resistance (resistance /support) - thick red lines, near which the movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines - the lines of the Ichimoku indicator, transferred to the hourly timeframe from the 4-hour one. Are strong lines.
Extreme levels - thin red lines from which the price bounced earlier. They are sources of trading signals.
Yellow lines - trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT charts - the net position size of each category of traders.
Indicator 2 on the COT charts - the net position size for the "Non-commercial" group.
