EUR/USD 5M
The EUR/USD pair fell all day on Tuesday. Federal Reserve Chairman Jerome Powell and US Treasury Secretary Janet Yellen were set to deliver a speech in the House of Representatives Committee on Financial Services. However, the content of the speeches of both became known much earlier than the beginning of the speeches themselves. Therefore, the market did not particularly react once they began (figure 1). In general, both officials noted that the US economy is recovering at a faster pace than expected, but still very far from a full recovery. We believe that such a vague interpretation, which traders have heard a hundred times already, can hardly be considered the reason for strengthening the dollar on Tuesday. Moreover, it immediately fell at the very beginning of the European trading session. There was a flat during the evening as well. But at the very beginning of the session, the price rebounded off the critical Kijun-sen line, and thus formed the first sell signal. Traders at this point could open short positions with the Senkou Span B line as the target (1.1912), which the price, however, overcame without any difficulties and problems and headed towards the second target - the extremum level of 1.1882. There was a rebound from this level, and traders could close shorts here, which would bring 25 points of profit. Also, it was possible to open long positions here, since the price rebounded from the 1.1882 level. This buy signal turned out to be false, and afterwards the pair settled below the 1.1882 level and formed the third signal of the day - again to sell. The downward movement continued and at first the first target was reached - the support level of 1.1856, which the price also almost immediately surpassed, and then the second target - the extremum level of 1.1836. Thus, traders could earn another 38 points on this trade. Excluding one losing trade, you could get 40-50 points of profit during the day.
EUR/USD 1H
On the hourly timeframe, we also see that, in general, the EUR/USD pair continues to move downward and has reached the lower border of the assumed horizontal channel - 1.1836. The price has already rebounded off this level. So this time there may be a rebound, but we are still inclined to surpass this level. The European Union and the United States are planning to publish business activity indices in the services and manufacturing sectors today. Recall that of the six indices, only the service sector in the European Union causes concern. It is unlikely to fully recover by the end of March, and it is unlikely that at least one of the other five indices will drop below the level of 50.0. Therefore, no fundamental changes are expected here. Also, we do not expect anything new from Powell's speech, who will speak for the second time in the US Congress, before a different committee, but still with the same speech. In addition, European Central Bank President Christine Lagarde will also speak today and we also have the US report on orders for durable goods. We believe that the last two events can trigger a reaction from traders. In general, you are advised to trade from important levels and lines that are plotted on the hourly timeframe. The closest level is 1.1836. Signals can be rebounds and when levels and lines are surpassed. 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 or a sharp reversal occurs after some fundamental or macroeconomic event.
COT report
Recall that the EUR/USD pair did not grow and did not fall by a single point during the last reporting week (March 9-15). Despite the fact that the downward movement is not too strong, market participants continue to actively get rid of buy (longs) contracts for the European currency. Look closely at the chart above. The green and red lines of the first indicator diverged as much as possible around September last year. Then we said that the upward trend is nearing its end. But instead, thanks to trillions of dollars poured into the US economy, the dollar continued to fall. However, in comparison with the September highs, the bulls failed to take the pair farther up. At the moment, the 2.5-year high is located near the 1.2350 level. And the green and red lines of the indicator, which represent the net positions of non-commercial and commercial groups of traders, tended to narrow all this time. That is, roughly speaking, a downward trend could have begun in September last year. Now, the green and red lines have accelerated their movement towards each other. In the two weeks leading up to the last COT report, the non-commercial group closed 22,000 Buy contracts (longs) and opened 22,000 Sell contracts (shorts). This is a very serious change for the most important group of traders. The latest COT report, which was released yesterday, showed that professional traders continued to get rid of purchases of the euro during the reporting week and closed another 12,000 Buy contracts. Thus, the mood of the major players became even more bearish. This all adds up to an excellent outlook for a downward trend, but be careful! We believe that global fundamentals could again have a strong impact on the EUR/USD pair in 2021. You have to understand that the global crisis is not over yet!
Explanations for illustrations:
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.
