EUR/USD 1H
The EUR/USD pair continued its downward movement clearly inside the descending channel on the hourly timeframe, on June 18, showing the moderate intentions of the bears. As a result, the pair almost reached the support level of 1.1171 by the end of the trading day, which we gave as the main target level yesterday. Since overcoming this level has not yet happened, and an upward trend line lies nearby, which continues to provide support to traders who aim for an increase, so far future prospects for the US currency are vague. If traders manage to overcome the trend line, then the bears can get a new reason to be optimistic and continue to sell the pair (buy the dollar) further. Given the fact that we have a clear downward channel, then buyers will wait for it to be overcome and only after that will they be able to enter the market.
EUR/USD 15M
Both linear regression channels are directed downward on the 15-minute timeframe, clearly signaling a downward trend in the shortest term. There are currently no signs of a possible turn up.
COT Report
The European currency continued to go up for most of the past week. Thus, we made assumptions that professional market players have invested in the euro, respectively, according to the latest COT report, the number of buy positions should have significantly increased. Or the number of contracts for selling the euro will sharply decrease. As a result, the report showed the implementation of the first option. The number of open buy positions increased by 12,662, while sales contracts were also reduced by professional traders (-2,579). Thus, a double effect was obtained. As for the general changes among all categories of traders in the COT report, the number of sell deals have grown over the past week. However, as we all perfectly understand, speculators drive the market, and accordingly, we find their actions interesting. The trend is already different this week. Speculators stopped opening new contracts for the purchase and, possibly, even reduced their number. We expect the new COT report to show a decrease in the net position in the European currency.
The overall fundamental background for the EUR/USD pair remains neutral, from our point of view. Traders had nothing to turn their attention to over the past day. Absolutely. Federal Reserve Chairman Jerome Powell's second speech in the US Congress completely echoed the first. There were no important macroeconomic publications. No important reports are planned either on the last trading day of the week. Thus, volatility may decrease today, and no currency should have advantages. At the same time, one should not forget that traders often trade illogically in recent coronavirus months. Thus, it does not mean that trading will be sluggish today, and that the movement will be counter-trend. Moreover, there is always US President Donald Trump who can flood news feeds with his sayings. His statements have little effect on the movement of the currency pair, however, it is difficult to pass them by. In addition, a video summit of the EU countries will be held today, which will discuss the issue of financing and the size of the Recovery Fund. The most important thing that we need to learn from its results is whether it will be possible to convince the "northern" countries to voluntarily and almost free of charge help the "southerners". If so, then the plan to help the European economy is likely to be approved, and the euro can get support in the short term.
Based on the foregoing, we have two trading ideas for June 19:
1) The bulls remain in the shade so far, so the EUR/USD pair could continue the downward movement. Today we recommend that you stay in sales with a support level of 1.1171. If the bears manage to overcome the upward trend line, then short positions can be maintained with the support levels of 1.1088 and 1.0962 as targets. Potential Take Profit after overcoming the trend line is from 75 to 200 points.
2) We advise you to consider the option of resuming the EUR/USD pair's growth only when the bulls manage to gain a foothold above the downward channel. In this case, we will recommend buying the euro while aiming for the resistance area of 1.1327-1.1341 and resistance levels 1.1380 and 1.1506. Potential Take Profit in this case is from 30 to 200 points.
