Analysis of EUR/USD 5M

EUR/USD accelerated its decline on Wednesday. The daily volatility was about 80 pips, which isn't a "weak value". However, there were no factors that could have triggered the accelerated decline for the euro and a sharp rise in the dollar. Let's delve into it. In the European Union, as usual, several representatives of the European Central Bank's monetary committee gave speeches. Frank Elderson's speech was memorable, but it was no different from the speeches of Kazaks, de Guindos, de Galo, de Cos, and other bankers. Therefore, the euro's decline was not particularly triggered by this event.

In the United States, the report on orders for durable goods was released, which turned out to be quite stronger than expected. However, it was released during the US session, and the EURUSD was already falling significantly during the European session. Thus, if macroeconomics and fundamentals had any impact on the pair's movement then it was relatively minor.

There were two trading signals. First, the pair rebounded from the level of 1.0537, and then it broke through it. The first buy signal turned out to be false and resulted in a loss of about 20 pips. The second sell signal allowed for a profit of approximately 30 pips. Overall, traders could obtain a small profit, but, of course, one could have hoped for a higher profit since yesterday's movement was quite good. Unfortunately, everything was spoiled by the rebound from 1.0537.

COT report:

On Friday, a new COT report for September 19 was released. Over the last 12 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 and is declining rather slowly. We have only witnessed a decline from the euro in the last two months and a decrease in the net position as well, which we have been waiting for for quite some time. At the moment, the net position of non-commercial traders is bullish and has significant potential for decline.

I have already mentioned the fact that red and green lines are very far from each other, which signals the end of an uptrend. This has persisted for over half a year, but eventually the situation started to change. Therefore, we believe that the uptrend is coming to an end. During the last reporting week, the number of long positions of the non-commercial group of traders decreased by 4,900 and the number of short ones fell by 6,100. The net position decreased by 11,000 contracts. The number of long positions is higher than the number of short ones of non-commercial traders by 102,000 but the gap is narrowing, which is a good sign. Even without COT reports, it is obvious that the euro should decline, and the COT reports support this scenario.

Analysis of EUR/USD 1H

On the 1H chart, the currency pair maintains a downtrend. We believe that the dollar will continue to rise in the medium term, but the pair could still enter a bullish correction in the near future. However, there are no signs of an imminent correction.

On September 28, traders should pay attention to the following key levels: 1.0366, 1.0485, 1.0537, 1.0581, 1.0658-1.0669, 1.0768, 1.0806, 1.0868, 1.0935, 1.1043, as well as the Senkou Span B (1.0694) and Kijun-sen (1.0578). 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.

On Thursday, Germany will publish an inflation report for September. Traders can look to the release of the US weekly Jobless Claims report and the third revision of the U.S. GDP report for the second quarter. These reports are of moderate importance and can either trigger a market reaction or investors could completely ignore them. Traders may also keep an eye on Federal Reserve Chair Jerome Powell's speech in the evening.

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.