EUR/USD 1H
The euro/dollar pair continued its downward movement on the hourly timeframe of August 3, which may turn into a downward trend, but met an obstacle in the form of a support area of 1.1702-1.1727 and rebounded off the lower border. Thus, further downward movement still has good prospects, as the bears managed to overcome the Kijun-sen line. However, a slight upward correction may now follow, afterwards a new test of the 1.1702-1.1727 area. If the sellers manage to push this area this time, then the downward movement will continue. Take note that buyers need to gain a foothold above the Kijun-sen line to restore their positions.
EUR/USD 15M
Both linear regression channels turned down on the 15-minute timeframe, which now signals a downward trend in the very short term. The new 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 (the difference between purchases and sales) immediately increased by 32,000, which is a signal of a sharp strengthening of the bullish mood. However, these conclusions were obvious even without the new COT report, since the euro continued to grow non-stop throughout the previous week, except for Friday (Friday was not included in the report). As for other categories of traders, their movements in the market do not matter now. For example, commercial traders opened 48,000 Sell-contracts, which is much more than the volume of all open contracts of the non-commercial category, but the euro still continued to sharply grow! In total, all major market players opened more Sell-contracts, but as we can see, this factor also did not significantly affect the pair's movement during the week. Thus, the data of the last report completely coincided with what is happening in the market.
The fundamental background for the EUR/USD pair did not change much on Monday. In addition, as we have already said, it does not have a prevailing meaning right now. The US currency has been falling in price against the euro and other competitors for at least a month. Now it is time for a banal technical correction and the main question is whether buyers of the pair believe in the possibility of the euro's further growth and the dollar's fall? If so, the pair will resume growth. The fundamental background that pushed the pair up in the last month remains the same. The coronavirus epidemic is still raging in the United States. The epidemiological situation is getting easier. In many cities of the country, protests continue to take place, and in Portland and Seattle, they have already turned into skirmishes with the police and special forces of US President Donald Trump, sent just to quell mass riots. Thus, with a strong desire, the bulls can start buying the European currency again. However, we believe that this will not happen in the near future, since the euro has already risen in price by 12 cents over the past three months. This is a lot, given that there is also a bit of positivity in the eurozone itself. Yes, the EU economy has contracted much less than the American one, but this is not a reason for exuberant joy.
Based on all of the above, we have two trading ideas for August 4:
1) Buyers gave the bears an opportunity to start implementing their ideas. Buy orders remain relevant for the resistance level of 1.1911, but now the bulls need to return to the area above the Kijun-sen line (1.1803), which will mean the resumption of the upward trend. The potential Take Profit in this case is about 90 points.
2) Bears have made a good first step towards a new downward trend, which, from our point of view, is very likely. Now they need to overcome the support area of 1.1702-1.1727 and continue to open short positions while aiming for the support level of 1.1644 and the Senkou Span B line (1.1575). The potential Take Profit in this case is from 40 to 110 points.
