Analysis of EUR/USD 5M

On Thursday, EURUSD traded in a tight range, and volatility remained low, which has been a significant issue in recent months. Nevertheless, as anticipated, the pair started a new wave of the bullish correction, as the previous one was too weak. Therefore, similar to last week, we can say that the upward movement will likely continue in the near future. This move doesn't necessarily have to be supported by macroeconomics or fundamentals. Although, today, the US will release crucial reports on the labor market and unemployment, which could potentially exert a lot of pressure on the dollar. On the other hand, economic reports were also released yesterday. The US published a report on jobless claims, and its value closely matched the forecast. Basically, there was nothing to react to.

We did not highlight the trading signals for a reason. The first signals began to form in the middle of the US session when it became clear that the market was flat. In theory, traders could open short positions on a bounce from a critical line or long positions on a breakthrough. However, it was apparent that traders should not have executed it. The buy signal had practically formed overnight...

COT report:

On Friday, a new COT report for September 26th was released. Over the past 12 months, the COT report data has been consistent with what's happening in the market. The net position of large traders (the second indicator) began to rise back in September 2022, roughly at the same time that the European currency started to rise. In the first half of 2023, the net position hardly increased, but the euro remained relatively high during this period. Only in the last two months, we have seen a decline in the euro and a drop in the net position, which we've been waiting for a long time. Currently, the net position of non-commercial traders is still bullish and this trend is likely to lose momentum soon.

We have previously noted that the red and green lines have moved significantly apart from each other, which often precedes the end of a trend. This configuration persisted for over half a year, but eventually, the situation began to change. Therefore, we still stick to the scenario that the upward trend is over. During the last reporting week, the number of long positions for the "Non-commercial" group increased by 4,000, while the number of short positions increased by 7,600. Consequently, the net position decreased by 3,600 contracts. The number of BUY contracts is higher than the number of SELL contracts among non-commercial traders by 99,000, but the gap is narrowing, which is a positive sign. In principle, it is now evident even without COT reports that the European currency is set to extend its weakness. Now the COT reports support this scenario.

Analysis of EUR/USD 1H

On the 1-hour chart, the pair ended the bullish correction, broke through the last local low, but has already started a new corrective phase. We believe that the dollar will continue to advance in the medium term, but we were expecting the pair to rise further in the near future. The pair has already crossed the Kijun-sen line, so it may continue to move towards the Senkou Span B line.

On October 6th, we highlight the following levels for trading: 1.0269, 1.0340-1.0366, 1.0485, 1.0537, 1.0581, 1.0658-1.0669, 1.0768, 1.0806, 1.0868, 1.0935, as well as the Senkou Span B line (1.0613) and the Kijun-sen (1.0519). The Ichimoku indicator lines can shift during the day, so this should be taken into account when identifying trading signals. There are also auxiliary support and resistance levels, but signals are not formed near them. Signals can be "bounces" and "breakouts" of extreme levels and lines. Don't forget to set a breakeven Stop Loss if the price has moved in the right direction by 15 pips. This will protect against potential losses if the signal turns out to be false.

On Thursday, there are no interesting reports or events lined up in the European Union. The US will release two crucial reports on NonFarm Payrolls and unemployment. The market will analyze the values of both reports simultaneously, so it is impossible to predict it in advance. It would be wise to prepare for any kind of movement. Ideally, you should set a Stop Loss to break-even when the reports are finally released.

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.