EUR/USD 5M
The EUR/USD pair was trading more or less calmly during the fourth trading day of the week. At least until the US trading session. But after lunch, a very strong (as for the 5-minute timeframe) downward movement began, which (a miracle!) was provoked by macroeconomic data from overseas. In recent months and even a year, we have repeatedly said that before the pandemic and crisis, markets reacted completely differently to reports. Yesterday was a prime example of how the markets reacted to reports in the past. I would like to believe that it was not a banal coincidence. Basically, there were a lot of different reports yesterday and several interesting signals were formed. Let's figure it out. The first thing I would like to note is that the Senkou Span B line, which was located near the level of 1.2199, increased to the level of 1.2208 yesterday. This was a very important moment, as it played an important role in forming signals. The first sell signal was formed early in the morning and turned out to be false, since the price did not go down even 15 points. However, interesting moments have already begun here, because despite the weakness of the index of business activity in the service sector (the number "1" in the chart), it was after it was released that the upward movement began. So the reversal was clear after this report, so traders could manually close short positions for a couple of points in profit. Then even more interesting movements began. The price sharply surpassed the Kijun-sen line just out of the blue, since there were no reports at that time. But at the same time it bounces off the Senkou Span B line and goes back to settling below the critical line. At this point, the pair should have been sold again at the area below the Kijun-sen. Then reports began to be published in America. At the beginning, it was necessary to set Stop Loss above the critical line or just be on the lookout to close the short positions in time if the price sharply turns up. However, it did not turn around, continued downward movement, worked out the extremum level of 1.2160, overcame it and subsequently dropped to the support level of 1.2127. There were a few more interesting points here. A short position should be closed near the level of 1.2160, as initially a rebound followed from it. As a result, the trade brought around 20 points of profit. However, it was not necessary to open long positions, since right at the time of the rebound during the US session, business activity indices (services, composite) were published. Not the most important data, but keeping in mind that similar indices in the eurozone were worked out in the morning, one should not risk it. But surpassing the level of 1.2160 could be done, since all of the reports up to this point were in favor of the dollar, setting Stop Loss above 1.2160. As a result, the price dropped to the level of 1.2127, where it was necessary to close the shorts and exit the market. The third sell trade brought another 27 points in profit.
Overview of the EUR/USD pair. June 4. The Beige Book showed the optimism of all 12 US Federal Reserve Banks. Doubts about the rate of recovery of the labor market.
EUR/USD 1H
On the hourly timeframe on Thursday, the euro/dollar pair was finally trading actively and finally left the channel 1.2160 - 1.2243. And so the downward movement can now continue towards the following targets. Unfortunately, there is still no trend line or channel to trade according to it. Moreover, even now it does not seem that the US dollar is capable of showing long-term growth. On Friday, we still recommend trading from important levels and lines that are indicated on the hourly timeframe. The nearest important levels at this time are 1.2051, 1.2113, 1.2160 and 1.2213, as well as the Senkou Span B (1.2199) and Kijun-sen (1.2198) 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 15-20 points in the right direction. This will protect you against possible losses if the signal turns out to be false. A number of important reports will be published in the United States, and after yesterday's events, there is reason to believe that the markets will react to today's reports as expected. Of course, first of all today, traders will focus on the publication of the NonFarm Payrolls report. However, in addition to it, the European Union will publish data on retail sales for April, and European Central Bank President Christine Lagarde will also speak. And in America, Federal Reserve Chairman Jerome Powell will speak and a report on the unemployment rate will be released. And these are just the most important events of the day. Therefore, you should be prepared for sharp reversals and high volatility.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP/USD pair.
COT report
The EUR/USD pair rose by 60 points during the last reporting week (May 18-24). The new Commitment of Traders (COT) reports, which was released yesterday, showed that professional traders continue to increase their buying positions in the European currency. This time, they opened 3,800 new Buy contracts (longs) and closed 1,400 Sell contracts (shorts). Thus, the net position for this group of traders increased by 5,200. Not much, but also not a little. And so, the bullish mood of market participants becomes stronger again, which increases the euro's prospects for succeeding growth in 2021. The green and red lines (net positions of commercial and non-commercial traders) of the first indicator continue to move away from each other, which indicates the strengthening of the current trend (in our case, the upward trend). Therefore, at this time, the COT report clearly signals a more preferable continuation of the euro's growth. In general, professional traders have opened 240 thousand contracts for buying and 133 thousand for selling. And so there is almost twice a difference. But we continue to believe that the main factor is not the actions of professional players, but the actions of the Federal Reserve and the US Congress. The chart above clearly shows that at a certain point, the first indicator began to signal the end of the upward trend, that is, large players began to reduce longs and move to shorts. However, this did not lead to a reversal of the global trend downwards, which indicates other, more significant factors affecting the exchange rate of the European currency.
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.
