EUR/USD 1H
The euro/dollar pair finally started a more or less noticeable downward movement on the hourly timeframe of July 31. We have specially built a new ascending channel that shows that the pair's quotes have left it. At the same time, buyers released the pair below the critical Kijun-sen line, so we have two factors at once at this time, speaking in favor of a certain downward movement. However, it is premature to conclude that the bulls are completely sated with the pair's purchases. The pair can return to the area above the Kijun-sen line at any time, which will mean the resumption of the upward trend. Thus, traders will have to decide on their further actions and strategies in the coming days.
EUR/USD 15M
The lower channel of linear regression turned down on the 15-minute timeframe, the correction began, and there are also signs of a downward movement starting on the hourly timeframe. A new report from the Commitments of Traders (COT) report showed a very telling change in the mood of professional traders. The category of non-commercial traders opened 36,000 new Buy-contracts during the reporting week (July 22-28). This category has opened only 3,700 Sell contracts. Thus, the net position increased by 32,000 at once, which is a signal of a firm strengthening of the bullish mood. In principle, we made similar conclusions with you over the past week, as the euro currency continued to grow non-stop. As for other categories of traders, they do not matter now. For example, commercial traders opened 48,000 Sell-contracts, but the euro continued to sharply grow! In total, all major players opened more Sell-contracts, but, as we can see, this factor did not significantly affect the pair's movement during the week. Thus, the report data completely coincided with what is happening in the market.
The fundamental background for the EUR/USD pair did not change at all on Friday. We believe that the euro started to fall solely due to the technical need to adjust and the desire of traders to take part of the profit on long positions. Although a large number of important statistics were published on Thursday and Friday in the United States and the EU. However, it was a failure in every sense of the word in America, and let's say, tolerant in the EU, as for the crisis. Therefore, the fundamental background has not changed in the long term, but we still believe that market participants could already take into account all the current factors and will also be satisfied with the pair's purchases. The European Union, Germany and the United States are set to publish business activity indices for July on Monday, August 3. All these indicators should reach more than 50, and we have no doubt that they will exceed the forecasts. However, in any case, these reports are not extremely important at this time, so it is unlikely to expect a serious market reaction. We believe that technical factors will still come first on the first trading day of the week. Therefore, the correction may continue. However, do not forget to keep track of news on the most important topics. These are the topics of the political, epidemiological, social and economic crisis in the United States. For example, a new increase in the number of daily coronavirus infections in the US could negatively affect the demand for the US currency.
Based on all of the above, we have two trading ideas for August 3:
1) Buyers finally gave the bears a chance to take a breath. Buy orders remain relevant for the target resistance level of 1.1996, but now the bulls need to wait for the pair's quotes to return to the area above the Kijun-sen line (1.1797), which will mean the resumption of the upward trend. The potential Take Profit in this case is about 150 points.
2) Bears have a chance to form a more or less strong downward movement for the first time in a long time. Formally, even now it is possible to open short positions while aiming for the Senkou Span B line (1.1575), but we recommend doing this in small lots, as well as placing a short Stop Loss. The potential Take Profit in this case is about 190 points.
