Analysis of EUR/USD 5M

EUR/USD changed direction several times on Wednesday, but at the end of the day, the closing rate was the same as the opening rate. However, the quotes have edged up. In general, not much has changed over the past day. There were plenty of important news and events, but the euro is rising again, which means a new corrective phase may be forming. In principle, the dollar had a reason to fall yesterday. The ISM manufacturing index unexpectedly fell significantly. ADP private payrolls figures were far below expectations, the Federal Reserve did not raise the key rate, and Fed Chair Jerome Powell did not make any particularly hawkish statements at the press conference. The dollar needs more substantial reasons to resume its upward movement.

As for trading signals, the euro isn't clearly in a flat phase, unlike the pound. Therefore, the signals were reasonably good. Initially, the pair bounced off a critical line and dropped to the 1.0530 level. The short position brought in around 25 pips of profit. Long positions that were opened around the 1.0530 level did not yield a profit since the price failed to reach the Kijun-sen level by just a few pips and then it dropped back to 1.0530. Therefore, the trade was closed at a stop-loss without any losses. In the evening, the bounce from the 1.0530 level should not have been executed because that was the time when the results of the Fed meeting were announced and Powell gave his speech. In any case, this signal formed too late.

COT report:

On Friday, a new COT report for October 24th 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 euro 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 ultimately, the lines have started moving closer to each other. 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 1,200, while the number of short positions fell by 1,600. Consequently, the net position increased by 400 contracts, which means it remained almost unchanged. The number of BUY contracts is still higher than the number of SELL contracts among non-commercial traders by 82,000, but the gap is narrowing. In principle, it is now evident even without COT reports that the euro is set to extend its weakness.

Analysis of EUR/USD 1H

On the 1-hour chart, the pair has shown three corrective phases but hasn't been able to consolidate below 1.0530, and is currently aiming for the fourth corrective phase. As we mentioned, this week has a very strong fundamental and macroeconomic background, so by the end of the week, the price can go anywhere. Yesterday, the dollar didn't find any support and started a new downward movement.

On November 2, we highlight the following levels for trading: 1.0269, 1.0340-1.0366, 1.0485, 1.0530, 1.0581, 1.0658-1.0669, 1.0768, 1.0806, 1,0868, 1,0935, as well as the Senkou Span B line (1.0575) and the Kijun-sen line (1.0609) lines. 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, final manufacturing PMI values will be published in the European Union and Germany. These are not crucial data points. In the United States, there will be jobless claims reports, which are also not highly significant. It's worth noting that the Bank of England will have a meeting, the results of which could also impact the euro.

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.