Analysis of EUR/USD 5M
On Thursday, EUR/USD traded as if it were a Saturday (if the market was open on Saturdays). There were virtually no significant movements. On one hand, this is understandable since there were no important events. On the other hand, it's important to remember that the market can move with volatility and trends even on days when there's no fundamental news. In other words, the absence of news doesn't necessarily mean that the pair will remain stagnant throughout the day. However, we just witnessed such a day. Volatility was only 45 pips, and there was basically nothing to analyze. The eurozone GDP in the second quarter came in at 0.1%, not 0.3% as previously expected, and the number of unemployment benefit claims in the US was slightly better than forecasts. Both reports were on the dollar's side, and it edged up. However, this marginal movement wasn't exciting.
Throughout the day, the price didn't come close to any significant levels or lines. There were no trading signals, which is actually a good thing because with such low volatility, it would have been difficult to make any meaningful profits.
COT report:
On Friday, a new COT report for August 29 was released. Over the last 11 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 rising too. In the last 6-7 months, the net position has not risen but the euro remains at very high levels. At the moment, the net position of non-commercial traders is bullish and remains strong. The euro continues to stay relatively expensive compared to the 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 decreased by 8,800 and the number of short ones rose by 3,200. The net position decreased by 12,100 contracts. The number of long positions is higher than the number of short ones of non-commercial traders by 148,000. 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.
Analysis of EUR/USD 1H
On the 1H chart, EURUSD resumes its negative trading, since it doesn't have a good reason to sharply rise in the medium-term. The pair has breached the 1.0768 level, indicating that the euro may continue its downward movement, which is reasonable in the mid-term. We expected a new corrective phase this week, but that seems to have been put off for now. There are hardly any important reports this week. On the other hand, next week, we can look forward to influential events like the US inflation data and the central banks' meetings.
On September 8, traders should pay attention to the following key levels: 1.0537, 1.0581, 1.0658-1.0669, 1.0768, 1.0806, 1,0868, 1,0935, 1,1043, 1,1092, as well as the Senkou Span B (1.0855) and Kijun-sen (1.0748) 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.
Today, the macroeconomic events on the calendar are thin, with no standout releases to note. Germany's Consumer Price Index stands as the sole report, but it's a second assessment for August so it's unlikely to stir some market reaction. As mentioned before, a weak background doesn't guarantee the absence of volatility, but we should probably brace for no definite movements.
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.
