Analysis of EUR/USD 5M
EUR/USD only showed some movement in the latter half of the day. There was no volatility during the European trading session. However, the market became a bit more active during the US session, but overall, volatility remained at around 40 pips, which is quite low. In general, it was another "boring Monday."
As expected, the Eurozone inflation report had no impact on the pair. This is because it was the second estimate for February, which is the same as the first estimate. Therefore, traders simply had nothing to react to. Fortunately, the dollar managed to strengthen in the latter half of the day. Recall that the global fundamental and macroeconomic background suggests that the dollar will rise, and this week, the Federal Reserve meeting will take place. Fed Chief Jerome Powell's rhetoric and the central bank's stance may remain firm, as inflation in the US has been persistent for quite some time. As a result, the Fed may hold the rate at its peak level for much longer, providing support to the greenback.
There were only two trading signals generated on Monday. First, the pair rebounded from the Senkou Span B line and moved in the intended direction by about 10 pips, and then it settled below the Senkou Span B line and fell by about 15 pips. Since volatility was low, it was extremely difficult to make profit from these signals. However, the dollar's rise that began on Monday could initiate a stronger move to the downside. Therefore, it may be wise to remain in short positions as we're seeing a downward trend on the hourly chart.
COT report:
The latest COT report is dated March 12. The net position of non-commercial traders has been bullish for quite some time. Basically, the number of long positions in the market is higher than the number of short positions. However, at the same time, the net position of non-commercial traders has been decreasing in recent months, while that of commercial traders has been increasing. This shows that market sentiment is turning bearish, as speculators are increasing the volume of short positions on the euro. We don't see any fundamental factors that can support the euro's growth in the long term, while technical analysis also suggests a downtrend. Three descending trend lines on the weekly chart indicate that there's a good chance of extending the decline.
At present, the red and blue lines are moving towards each other (indicating a trend reversal after a rise). Therefore, we believe that the euro will fall further. During the last reporting week, the number of long positions for the non-commercial group decreased by 6,000, while the number of short positions decreased by 14,100. Accordingly, the net position increased by 8,100. The number of buy contracts is still higher than the number of sell contracts among non-commercial traders by 74,000 (previously 66,000).
Analysis of EUR/USD 1H
On the 1-hour chart, EUR/USD may initiate the long-awaited downtrend, which could take the price far down. The price has surpassed the Senkou Span B line, which means that we can expect the pair to fall further. The descending trendline also supports sellers. Despite the low volatility, the pair still managed to show a downward movement yesterday, which is encouraging because the dollar could have risen. We hope that the Fed doesn't give unpleasant surprises to the dollar on Wednesday.
On March 19, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0823, 1.0889, 1.0935, 1.1006, 1.1092, as well as the Senkou Span B line (1.0888) and the Kijun-sen line (1.0915). 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.
There will be few macroeconomic events on Tuesday. The US will release two minor reports on building permits and housing starts. These reports are unlikely to have a strong impact on market sentiment. However, if the dollar continues to rise, it will be a great sign. In this case, we can grow more confident about forming a downtrend.
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.
