The EUR/USD pair continued to fall quietly until it hit the level of 1.0123 on Tuesday, which was the last local low, the level from which the last round of the upward movement began. Yesterday this level was 1.0120, but by the end of the day we moved it 3 points higher. A rebound from this level provoked the euro's growth by 70 points, and we would like to note right away that such a strong and sharp growth was purely technical. Because no important macroeconomic statistics or "fundamentals" were available yesterday either in the US or in the European Union. Traders again had nothing to react to during the day. And after the completion of the current upward correction, we expect the pair to resume falling with targets near 20-year lows, which were updated a month ago. Correction may take several days.
Everything in regards to Tuesday's trading signals was just fine. Or almost perfect. The fact is that the only trading signal was formed near the level of 1.0120, and the price did not reach it by 3 points. This is an acceptable error, but traders had to decide for themselves whether to open a long position at this moment or not. If they did this, they could make a profit of about 40 points. The nearest target line Senkou Span B was located very far away, so the deal had to be closed manually in the late afternoon anyway.
The Commitment of Traders (COT) reports on the euro over the past six months have raised a huge number of questions. The chart above clearly shows that for most of 2022 they showed an openly bullish mood of commercial players, but at the same time, the euro fell steadily at the same time. At this time, the situation has changed, but NOT in favor of the euro. If earlier the mood was bullish, and the euro was falling, now the mood is bearish and... the euro is also falling. Therefore, for the time being, we do not see any grounds for the euro's growth, because the vast majority of factors remain against it. During the reporting week, the number of long positions for the non-commercial group increased by 8,400, and the number of shorts - by 4,100. Accordingly, the net position increased by about 4,000 contracts, which is a negligible change for the euro. The mood of major players remains bearish. From our point of view, this fact very eloquently indicates that at this time even commercial traders still do not believe in the euro. The number of longs is lower than the number of shorts for non-commercial traders by 35,000. Therefore, we can state that not only does the demand for the US dollar remain high, but that the demand for the euro is also quite low. The fact that major players are in no hurry to buy the euro may lead to a new, even greater fall. The euro has not been able to show even a tangible correction over the past six months or a year, not to mention something more. The highest upward movement was about 400 points. The pair has just managed to correct by 400 points over the past four weeks. Has the plan been completed?
We recommend to familiarize yourself with:
Overview of the EUR/USD pair. August 17. The first two trading days of the week showed which way traders are looking.
Overview of the GBP/USD pair. August 17. The pound is stuck. The first part of the statistics package this week was left without attention.
Forecast and trading signals for GBP/USD on August 17. Detailed analysis of the movement of the pair and trading transactions.
The pair completed the upward trend and now rushed down again on the hourly timeframe. We believe that globally everything is going according to plan, as the euro corrected up by 400 points, so now there are sufficient technical reasons for the resumption of the downward trend. Macroeconomic statistics are now of little importance to traders, and they were not available either on Monday or Tuesday. And those reports that are scheduled for this week are unlikely to lead traders astray. We allocate the following levels for trading on Wednesday - 1.0000, 1.0072, 1.0123, 1.0269, 1.0340-1.0366, 1.0485, as well as Senkou Span B (1.0245) and Kijun-sen lines (1.0245). Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also secondary support and resistance levels, but no signals are formed near them. Signals can be "rebounds" and "breakthrough" extreme levels and lines. Do not forget about placing a Stop Loss order at breakeven if the price has gone in the right direction for 15 points. This will protect against possible losses if the signal turns out to be false. The European Union will publish the second estimate of GDP for the second quarter, and in the US - a report on retail sales. Both reports are not super important, so we do not expect a strong market reaction to them.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the non-commercial group.