M5 chart of EUR/USD

On Tuesday, EUR/USD was almost at a standstill. The United States celebrated one of its main holidays, Independence Day. All trading platforms and financial institutions were closed. Volatility totaled just 27 pips. There were no significant fundamental or macroeconomic events either. At the end of the day, the US dollar posted minimal gains, which was nothing more than just market noise. Thus, we can hardly predict the pair's further movement at the moment.

Despite low volatility, three trading signals were made on Tuesday. The pair trice rebounded from the Senkou Span B but failed to move by even 15 pips in the right direction each time. Therefore, traders could only open just one position, which brought them neither profit nor loss in the end.

COT report:

On Friday, the new COT report for June 27 was released. Over the past 10 months, COT data has been in line with developments in the market. The net position of large traders (the second indicator on the chart) has been on the rise since September 2022. The euro started to show strength approximately at the same time. Currently, the net non-commercial position is bullish and keeps growing further. Meanwhile, the euro is still strong against the dollar. We have repeatedly pointed out that a relatively high value of the net position suggests a potential end of the uptrend. This is shown by the first indicator, where the red and green lines have significantly diverged, which often precedes a trend reversal. The euro attempted to decline in early May, but it resulted in a minor and not very strong retracement.

During the last reporting week, the number of long positions held by non-commercial traders decreased by 5,400 while the number of short positions fell by 5,800. As a result, the net position dropped by 400. The number of long positions still exceeds the number of short ones by 145,000, an almost threefold gap. A new correction phase has begun, which may indicate the start of a new downtrend. So, it is clear that the pair will be bearish even without COT reports.

H1 chart of EUR/USD

On the H1 chart of EUR/USD, the pair continues its decline, forming a new descending trendline. Currently, the pair is near the lines of the Ichimoku indicator as the pair has been in a flat phase in recent days. We can expect a reversal to the downside and a resumption of the downtrend as more significant events are scheduled for the second half of the week. We still believe that now is the time for a new medium-term decline within the range of 1.05-1.11.

On July 5, trading levels are seen at 1.0658-1.0669, 1.0762, 1.0806, 1.0868, 1.0943, 1.1012, 1.1092, 1.1137, as well as the Senkou Span B line (1.0893) and the Kijun-sen line (1.0928). Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance although no signals are made near these levels. Signals could be made when the price either breaks or bounces from these extreme levels. Do not forget to place Stop Loss at the breakeven point when the price goes by 15 pips in the right direction. In case of a false breakout, it could save you from possible losses.

Today, the eurozone and Germany will see the release of the second estimate for the services PMI for June. The market will hardly react to these data. In the US, the FOMC Minutes will be delivered in the second half of the day. The report rarely triggers a reaction in the market.

Indicators on charts:

Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals.

Kijun-sen and Senkou Span B are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines.

Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals.

Yellow lines are trend lines, trend channels, and other technical patterns.

Indicator 1 on the COT chart is the size of the net position of each trader category.

Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.