Analysis of EUR/USD 5M
EUR/USD showed volatility below 30 pips on Monday. We constantly emphasize that even volatility around 50 pips is very low for us to rely on good signals, trades, and profits, while 30 pips indicates a lack of movement. Moreover, we warned you that there might be no movements on Monday. Not only was there a lack of macroeconomic and fundamental background on Monday, but it was also Presidents' Day in the United States, and many platforms and banks were closed. Therefore, we saw just another boring Monday, during which absolutely nothing interesting happened.
The pair continues to move towards the Senkou Span B line, below which there is a possibility of reviving the downtrend. However, throughout the current week, there will be an extremely small amount of news and reports. Therefore, they may have some impact on the pair's movement. The question is whether the market decides to maintain a bearish bias. If it does, the pair will fall, as the euro still has no grounds for growth, except for corrective ones. If the pair surpasses the Senkou Span B line, then the probability of a more significant correction or an uptrend can be considered.
Throughout the first day of the week, there were no trading signals formed on the 5-minute timeframe. Therefore, it was not advisable to open trading positions. The pair may not show any notable movements during the entire week, and volatility may remain low.
COT report:
The latest COT report is dated February 13. The net position of non-commercial traders has been bullish for quite some time. The number of long positions is much higher than the number of short positions. In simpler terms, 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 indicates a shift into a bearish bias, as speculators are building up 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 signals the formation of a downtrend.
We have already drawn your attention to the fact that the red and blue lines have significantly diverged, often preceding the end of a trend. Currently, these lines are moving towards each other (indicating a trend reversal). Therefore, we believe that the euro will fall further. During the last reporting week, the number of long positions for the non-commercial group increased by 8,300, while the number of short positions increased by 17,700. Accordingly, the net position fell by 9,400. The number of buy contracts is still higher than the number of sell contracts among non-commercial traders by 52,000 (previously 63,000). Thus, commercial traders continue to sell the euro.
Analysis of EUR/USD 1H
On the 1-hour chart, the downtrend persists, even if the pair consolidated above the Kijun-sen. In our opinion, all the factors currently suggest that the dollar will strengthen. Therefore, we expect the euro to fall. The nearest target is the area of 1.0658-1.0669 and the pair may achieve this target in the near future. Now we need to wait for the corrective phase to end and the price to firmly settle back below the critical line.
On February 20, 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 (1.0799) and the Kijun-sen (1.0743) lines. 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.
On Tuesday, there are no events lined up in either the European Union or the United States. Therefore, today we also expect the same low volatility and minimal movements. Perhaps the pair will still try to test the Senkou Span B line.
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.
