EUR/USD 5M analysis.
Throughout the second trading day of the week, the EUR/USD currency pair remained inside the side channel between 1.0581 and 1.0658. Remember that the pair has been trading between these levels in principle for the past few days, essentially without forming any false signals. A flat is still a flat, though. Such a fairy tale had to end eventually. Yesterday, the pair made two unsuccessful attempts to cross this channel's upper limit. Nevertheless, a significant number of false signals were produced. However, the macroeconomic and fundamental background was once more missing, and volatility remained low. As a result, there has been no change to the overall technical picture. A significant downward correction is still overdue, but it won't start until the "New Year's flat" is over.
Tuesday brought some bad luck for traders. The critical line and the level of 1.0658 could have been determined by the pair with greater accuracy. Then, at the very least, respectable trading signals for sale would emerge, and there would be no loss. False signals, however, started to form in groups during the European trading session as the price-performed "songs and dances" around these levels. Only the first two could be worked out by traders. Since all subsequent signals formed in the same location after they suffered a loss, they should no longer be worked out. As a result, the day ended in a loss, which was expected given the total flat.
COT Report
The recent COT reports on the euro currency are entirely consistent with market activity. The aforementioned illustration makes it abundantly clear that since the start of September, the net position of major players (the second indicator) has been improving. At about the same time, the value of the euro started to increase. Although non-commercial traders' net positions are currently "bullish" and improving almost weekly, it is the relatively high value of the "net position" that now enables the impending completion of the upward movement. The first indicator, where the red and green lines are very far apart, which frequently denotes the end of the trend, signals this. The number of buy contracts from the non-commercial group increased by 12.7 thousand during the reporting week, while the number of short positions decreased by 4.8 thousand. The net position consequently increased by 7.9 thousand contracts. For non-commercial traders, there are currently 143 thousand more buy contracts than sell contracts. What remains to be seen is how much longer the major players will increase their long positions. This process, in our opinion, cannot go on for another two or three months. You need to "discharge" a bit, or adjust, even based on the net position indicator. Sales are 43 thousand more if we look at the overall indicators of open longs and shorts for all categories of traders (684 vs. 641k).
The euro/dollar pair remains extremely high and completely flat on the hourly time frame. We have fixed the Ichimoku indicator's last position and will not change it because the indicator's lines have already merged and lost all significance. You can see that they are currently being calculated fairly accurately, but there are some exceptions. The side channel 1.0581–1.0658 must now be relied upon. We can anticipate the trend movement picking back up if we can move past it. Alternatively, you should keep trading in hopes of a recovery from these levels. The following levels, as well as the Senkou Span B (1.0589) and Kijun-sen (1.0656) lines, are designated for trading on Wednesday: 1.0340-1.0366, 1.0485, 1.0581, 1.0658, 1.0736, and 1.0806. The Ichimoku indicator's lines can move throughout the day, so this should be considered when choosing trading signals. Additional support and resistance levels exist as well, but no signals are formed close to them. Levels, extremes, and lines can be "bounced" and "overcome" by signals. If the price has increased by 15 points and is moving in the right direction, don't forget to place a stop-loss order at breakeven. If the signal turns out to be false, this will shield against potential losses. There are still no significant events scheduled for December 28 in either the European Union or the United States. Thus, we do not anticipate the flat to come to an end. Volatility could stay low.
Explanations for the illustrations:
The movement may stop near the price levels of support and resistance (resistance/support), which are thick red lines. They don't provide trading signals, though.
The Ichimoku indicator's Kijun-sen and Senkou Span B lines have been moved from the 4-hour timeframe to the hourly one. have solid lines.
The price previously bounced off of the thin red lines that represent extreme levels. They provide signals for trading.
Trendlines, trend channels, and other technical patterns are represented by yellow lines.
The net position size of each trading category is represented by indicator 1 on the COT charts.
The net position size for the "non-commercial" group is represented by indicator 2 on the COT charts.
