EUR/USD 5M Analysis:
The EUR/USD currency pair traded sideways on Tuesday, averaging 50 points throughout the day, suggesting traders' eagerness to engage in trades. However, there was no market reaction to important macroeconomic statistics for the second consecutive day. This lack of response could be attributed to the fact that all four major reports in the European Union and the United States showed very "flat" values, almost entirely matching the forecasts. Consequently, there were no significant reactions or strong movements. For instance, the July ISM Manufacturing PMI index was 48.4 points, and the JOLTs Job Openings stood at 9.58 million.
Due to the remarkably low volatility, the main question of the day revolved around whether the price would encounter any significant levels or lines. Unfortunately, the answer was negative, as the price failed to touch any lines or levels throughout the day, generating no trading signals. With no significant economic events scheduled for today, we may observe another day of sluggish movements or a flat market. What was an exciting start to the new week turned out to be rather dull and uninteresting.
COT Report:
On Friday, the new COT report for July 25th was released. Over the past ten months, the COT data has consistently reflected market developments. The illustration above clearly shows that the net position of major players (the second indicator) started rising in September 2022, coinciding with the increase in the euro's value. Although the net position has not grown significantly over the last 5–6 months, the euro remains high. Non-commercial traders have a strong and "bullish" net position, and the euro continues to appreciate against the dollar in the long term.
Traders have been alerted to the relatively high "net position," which may indicate a potential end to the upward trend. This signal is evident in the first indicator, where the red and green lines have significantly diverged, often signaling trend reversals. During the last reporting week, the number of buy contracts among the "Non-commercial" group decreased by 13.8 thousand, and the number of shorts decreased by 12.2 thousand, leading to a net position decrease of 1.6 thousand contracts. The number of buy contracts exceeds the number of sell contracts for non-commercial traders by 177 thousand, indicating a significant gap of more than three times. In essence, even without the COT reports, it is evident that the euro is likely to decline, but the market is not in a hurry to sell.
EUR/USD 1H Analysis:
The pair corrected towards a critical line on the hourly timeframe and then rebounded. Our belief remains that the European currency should continue its decline. Still, this week may bring important events and reports that could trigger strong movements in either direction for the pair. Although the first batch of statistics on Monday and Tuesday was ignored, their values did not suggest a strong market reaction.
For August 2nd, we have identified the following levels for trading - 1.0806, 1.0868, 1.0943, 1.1012, 1.1092, 1.1137, 1.1185, 1.1274, as well as the Senkou Span B line (1.1149) and the Kijun-sen line (1.1047). Traders should consider the possibility of the Ichimoku indicator lines shifting during the day when determining trading signals. Additional support and resistance levels also exist, but no signals are forming near them. Trading signals may involve "bounces" and "breakouts" of extreme levels and lines. Remember to place a Stop Loss order at breakeven if the price moves in the right direction by 15 pips. This will protect against potential losses if the signal turns out to be false.
No significant events are scheduled in the European Union today, and the only report of interest in the US is the ADP Employment Change report, which is an analog of NonFarm Payrolls but less significant. Therefore, the market may lack strong reasons for active trading today, leading to another day of potentially flat movement.
Explanation of illustrations:
Price support and resistance levels - thick red lines around which the movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines - lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
Extreme levels - thin red lines from which the price previously bounced. They are sources of trading signals.
Yellow lines - trend lines, channels, and other technical patterns.
Indicator 1 on COT charts - the size of the net position for each category of traders.
Indicator 2 on COT charts - the size of the net position for the "Non-commercial" group.
