EUR/USD 5M
The euro/dollar pair started a downward movement on Thursday. This is exactly what we warned about yesterday. The pair showed absolutely unreasonable growth for almost the entire week, behind which there were no macroeconomic indicators or fundamental events. Thus, we could assume that the market began to work out the European Central Bank rate hike in advance. And yesterday, when the central bank raised the rate by 0.75% (which was fully in line with forecasts), the market began to get rid of the euro, as there were no more reasons to buy it. However, a pullback from the local high of 120 points cannot break the upward trend that has formed in recent weeks. It is clearly indicated by an ascending trend line. Also, the pair is above the lines of the Ichimoku indicator on the hourly timeframe. Therefore, despite the dollar's growth on Thursday, the upward movement may continue. But in the long term, the euro's growth is still in doubt. We even admit that this week's upward movement was a run-up before a new powerful fall. After all, next Wednesday the Federal Reserve will raise its rate by 0.75%, which may become a reason for new long positions on the dollar.
There were plenty of trading signals on Thursday, but all the signals from the US trading session should have been ignored, because they were formed at the time when the ECB results were announced, and important statistics were published in the USA. Thus, it was impossible to predict the pair's movement, as well as the values of the reports themselves. During the European trading session, the pair formed a buy signal near the 1.0072 level, which turned out to be false, and then two sell signals near the same level, which duplicated each other. Therefore, on the first transaction, a loss of about 20 points was received, and on the second - a profit of about 30 points.
COT report:
The euro Commitment of Traders (COT) reports for 2022 could be used as good examples. In the first part of the year, the reports were pointing to the bullish sentiment among professional traders. However, the euro was confidently losing value. Then, for several months, reports were reflecting bearish sentiment and the euro was also falling. Now, the net position of non-commercial traders is bullish again and the euro is still dropping. This could be explained by the high demand for the US dollar amid the difficult geopolitical situation in the world. Even if demand for the euro is rising, high demand for the greenback prevents the euro from growing. In the given period, the number of long non-commercial positions increased by 6,500, while the number of shorts decreased by 4,000. Accordingly, the net position increased by about 10,500. This fact is not of particular importance, since the euro still remains "at the bottom". At this time, commercial traders still prefer the euro to the dollar. The number of longs is higher than the number of shorts for non-commercial traders by 48,000, but the euro cannot derive any dividends from this. Thus, the net position of the non-commercial group can continue to grow further, this does not change anything. If you look at the total open longs and shorts for all categories of traders, then shorts are 22,000 more (586,000 vs 564,000). Thus, according to this indicator, everything is logical.
We recommend to familiarize yourself with:
Overview of the EUR/USD pair. October 28. The ECB is going to continue to raise the key rate.
Overview of the GBP/USD pair. October 28. The pound does not want to lose the gained momentum. Meetings of the BoE and the Fed ahead!
Forecast and trading signals for GBP/USD on October 28. Detailed analysis of the movement of the pair and trading transactions.
EUR/USD 1H
You can see on the hourly timeframe that the pair continues to form a new upward trend. The euro's decline, which we expected, has happened, but the upward trend remains relevant. Therefore, growth may resume, although in the long term, the "happy euro" may not last long. On Friday, trading could be performed at the following levels: 0.9635, 0.9747, 0.9844, 0.9945, 1.0019, 1.0072, 1.0124, 1.0195, 1.0269, as well as the Senkou Span B (0.9765) and Kijun-sen (0.9900). Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also additional support and resistance levels, but trading signals are not formed near them. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. There will be nothing remarkable in the European Union. On the other hand, we have reports on income and expenses of the American population in the US, as well as the consumer sentiment index from the University of Michigan. We do not expect a strong market reaction to such data.
What we see on the trading charts:
Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.
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 reflects the net position size of each category of traders.
Indicator 2 on the COT charts reflects the net position size for the non-commercial group.
