EUR/USD 5M
The EUR/USD pair was trading very calmly once again during the first trading day of the week. An upward movement was observed for most of the day, however, quotes remain inside the horizontal channel at 1.2160-1.2240, in which it has been spending several days. Thus, the pair is currently approaching the upper border of this channel and is likely to test it. We said earlier that, in general, the upward trend for the pair persists, and upward trends rarely end near the previous peaks. Thus, we expect the upward movement to continue and surpass the level of 1.2240. The movement was like a textbook on the 5-minute timeframe, except for one moment. There was a sharp downward spurt around the middle of the European trading session, and then an equally rapid upward movement. Except for this moment, which could have seriously ruined the nerves of traders, the movements were extremely smooth and calm. Let's take a look at the chart and break down yesterday's trades. Take note that there wasn't any important macroeconomic report, nor a single important fundamental event. At the very beginning of the European trading session, a buy signal was formed in the form of a breakthrough of the extremum level of 1.2190 and the Kijun-sen line. In fact, this was the only signal of the day. It was necessary to open long positions here, however, literally an hour later, the quotes fell, which we mentioned above, so the deal was closed at a loss of 17 points. During the sharp fall and no less sharp recovery, the price formed two more signals, to buy and immediately to sell, but they should not have been worked out. During the first signal, the price had already gone down a lot of points, so it was too late to enter a short position. A long position should not have been opened, because during the time it was formed, two false signals had already formed near the critical line. In addition, such a sharp drop in quotes in the middle of the day, when there were no important events, should have alerted traders and made them filter out these signals.
Overview of the EUR/USD pair. May 25. How Joe Biden is saving the US economy and what it means for the dollar.
Overview of the GBP/USD pair. May 25. G7 countries can sign a corporate tax agreement by the end of the month.
EUR/USD 1H
The upward trend persists on the hourly timeframe, and the pair quickly completed another round of correction and now it is aiming for the 1.2240 level again, from which it has rebounded twice. So for the time being, the pair remains flat, but with a clear upward bias, since the upward trend line remains relevant. Usually, when the price stays near a certain level for a long time, it eventually surpasses it. Therefore, taking into account all aspects, we believe that the upward movement will continue. However, in any case, before the price settles below the trend line, it is not recommended to consider short positions and expect a downward movement. On Tuesday, we still recommend trading from important levels and lines that are indicated on the hourly timeframe. The nearest important levels at this time are 1.2160, 1.2190 and 1.2243, as well as the Senkou Span B (1.2149) and Kijun-sen (1.2200) 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. No major events scheduled for Tuesday in the European Union, and only minor reports will be published in the United States. You can pay attention to the report on consumer confidence, but it is unlikely to have a strong impact on the market.
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 only 20 points during the last reporting week (May 11-17). The new Commitment of Traders (COT) reports, which was released yesterday in the US, showed that professional traders continue to build up buy positions in the European currency. A total of 10,700 Buy contracts (longs) and 1,600 Sell contracts (shorts) were opened. Thus, the net position increased by another 9,000 contracts. Take note that a few weeks ago the "non-commercial" group of traders, which is considered the most important of all, began to increase purchases of the euro again. We have repeatedly said that we believe the main reason for the euro's growth and the greenback's fall is the flooding of the American economy with dollars. But the COT reports show that the big players are also joining the trend, which is not in their power this time, but in the power of the Federal Reserve and the US government. One way or another, but the demand for the euro is growing, the supply of the dollar is increasing, so wherever you go, there is a wedge everywhere. Recall that around fall 2020, the COT reports showed the end of the upward trend, but either the bears simply lacked the strength and desire for a new downward trend, or the money from the Fed outweighed the scales, but the uptrend resumed. The first indicator eloquently shows that the red and green lines are moving away from each other again, which is a sign of an upward trend. In simpler terms, this means that professional players continue to build up longs, and commercial traders (hedgers) - build up shorts. Therefore, at this time, the COT reports again speak in favor of the fact that the euro will continue to grow.
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.
