EUR/USD 5M
The EUR/USD pair was moving quite actively on Wednesday, fully confirming our forecasts. Recall that we said earlier that the pair moves 2 out of 5 trading days with normal volatility, and 3 with low volatility. Thus, after the zero Monday and Tuesday, it was Wednesday's turn, when at least some more or less significant events appeared in the calendar of macroeconomic events. However, you shouldn't be overjoyed right away. In general, yesterday falls more under the definition of exception. Although, of course, we note that not most of the reports were followed by the market reaction. The problem is that this is almost an isolated case in recent months, when most of the reports have been worked out. The first report was the index of business activity in the European Union in the service sector (figure "1" in the chart). It fell from 60.8 to 59.8, and traders responded with sell-offs, which pushed the pair down 35 points. To be honest, it is a big surprise for us that the markets decided to react to this index. The figure "2" - retail sales in the European Union - was ignored, but the value of the indicator itself almost completely coincided with the forecast. The number "3" is the ADP report on changes in the number of employees in the US private sector. The markets worked out its growth by 35 points, although the dollar could have fallen even more, given that the value for July was only 330,000, while the forecast was 695,000. The number "4" is the index of business activity in the US services sector, the number "5" is the index of business activity of the ISM. It was after these indices that the strongest movement of the day began. Now let's take a look at how the pair should have been traded on Wednesday. The first sell signal was formed at the beginning of the European session - a rebound from the level of 1.1881 and turned out to be profitable, as the price dropped to the critical line, from which it just rebounded perfectly. The result is a profit of 26 points. During the rebound from the Kijun-sen line and a breakthrough of 1.1852, one should have opened long positions, as it was a buy signal. Longs should have been kept open when the ADP report was published, but Stop Loss should have been set to breakeven, since the price was already moving in the right direction at that time. As it became known later, the movement only intensified, and the price overcame the level of 1.1881. Manual closing of long positions followed before the publication of business activity indices in the US, or placing Stop Loss below 1.1881. In any case, a profit of at least 20 points was obtained on a long position. The last two sell signals should be ignored, as they formed immediately after the publication of important indices. Thus, the day ended with a profit of at least 46 points.
Overview of the EUR/USD pair. August 5. James Bullard: it's time to complete the anti-crisis policy and wind up QE!
Overview of the GBP/USD pair. August 5. What is the rate hike and QE curtailment? The US labor market is extremely weak!
EUR/USD 1H
The technical picture still looks dull on the hourly timeframe. Although volatility slightly increased yesterday, the movement remained sideways. However, the price managed to fall to the upward trend line, as well as the Senkou Span B line. Therefore, if there is a rebound from them, it will mean a very likely resumption of the upward trend. Overcoming these obstacles will mean a change in the trend to a downward one. On Thursday, we still recommend trading from important levels and lines. The nearest important levels at this time are 1.1756, 1.1852, 1.1894, 1.1922, as well as the Senkou Span B (1.1830) and Kijun-sen (1.1875) lines. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. Signals can be rebounds or breakthroughs of these levels and lines. Do not forget about placing a Stop Loss order at breakeven if the price moves 15 points in the right direction. This will protect you against possible losses if the signal turns out to be false. No important publications or events in the European Union on Wednesday. A report on claims for unemployment benefits will be published in America and that's all. We still believe that most of the macroeconomic statistics are ignored by the markets, so we do not expect a reaction to this single report of the day.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP/USD pair.
COT report
The EUR/USD increased by 5 points during the last reporting week (July 20-26). However, the pair's movements are not the main thing. The main thing is that the major players have been increasing the number of sell contracts (shorts) for the sixth week in a row and closing buy contracts (longs) for the euro currency. This is very clearly seen in the second indicator in the chart, which has been steadily declining recently. Recall that this indicator displays the net position of the "non-commercial" group, the most important group of traders. Non-commercial traders closed 5,600 buy contracts (longs) and opened 1,700 sell contracts (shorts). Thus, their net position decreased by another 7,300 contracts. This suggests that the bullish mood of professional traders continues to weaken. At the same time, we would like to note that the euro currency has not started a new downward trend and this is a very important point, from our point of view. We have already said earlier that when the red and green lines of the first indicator (the net positions of the "non-commercial" and "commercial" groups of traders) move towards each other after a long period of distance, it means that the current trend is completed and a new one is emerging. However, in our case, we are talking about a correction against a global upward trend. It turns out that, on the one hand, the readings of the Commitment of Traders (COT) reports and the movement of the pair coincide, and on the other hand, the upward trend persists, and the euro has not fallen very much and has fallen in price. Moreover, it did not even manage to update the previous local low. From our point of view, this suggests that the actions of major players are again overlapped by the actions of the Federal Reserve, which continues to print money. Thus, the money supply in the United States continues to grow, which leads to the depreciation of the dollar. And this factor negates all the efforts of major players who are getting rid of the euro.
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.
