Analysis of EUR/USD 5M
On Friday, EUR/USD showed the same movement - low volatility, no trends, and false signals. In general, the euro was falling all week, so maybe there was a trend. But such a trend is hardly interesting, as the price was falling by a maximum of 20 points a day. Friday was just the same. In the first half of the day, traders actively tried to extend the euro's decline, in the second half, the bears retreated and the euro started to rise. The Consumer Price Index in the European Union had no value for traders, as the second estimate of the report was published, which usually does not differ from the first. Thus, the technical picture remained unchanged.
One would not even want to talk about Friday's trading signals. The volatility was 49 pips, and right in the middle of this range was the 1.0868 level, around which the price "danced" for half a day. At first, there was a rebound from this level, then a breakthrough, then a reversal. All three signals turned out to be false, and in the second case, the price managed to move in the right direction by at least 15 pips. Accordingly, there was a small loss from the first signal, the second triggered a Stop Loss at break-even, and the third should not have been executed. Not the best day, but last week was far from ideal.
COT report:
On Friday, a new COT report for August 15 was released. Over the last 11 months, COT reports fully corresponded to what is happening in the market. The chart above clearly shows that the net position of major traders (the second indicator) began to grow in September 2022 and at about the same time the euro started rising too. In the last 6-7 months, the net position has not risen but the euro remains at very high levels. At the moment, the net position of non-commercial traders is bullish and remains strong. The euro keeps climbing against the US dollar (in the long term).
I have already mentioned the fact that a fairly high value of the net position signals the end of an uptrend. This is also confirmed by the first indicator where the red and green lines are very far from each other. Usually, it precedes the end of the trend. During the last reporting week, the number of long positions of the non-commercial group of traders increased by 4,400 and the number of short ones fell by 5,600. The net position grew by 10,000 contracts. The number of long positions is higher than the number of short ones of non-commercial traders by 160,000. This is a very large gap as the difference is almost threefold. Even without COT reports, it is obvious that the euro should decline but speculators are still in no hurry to sell.
Analysis of EUR/USD 1H
On the 1H chart, the pair broke out of the sideways channel, where it had spent two weeks, but the downward movement is very weak, and the euro is calling for a correction. For now, the price is below the Ichimoku indicator lines, but this week, it may try to correct towards the Senkou Span B line. The macroeconomic background will be quite weak, so there is no reason for the market to increase activity.
On August 21, traders should pay attention to the following key levels: 1.0658-1.0669, 1.0762, 1.0806, 1.0868, 1.0943, 1.1043, 1.1092, 1.1137, 1.1185, as well as the Senkou Span B lines (1.0970) and Kijun-sen (1.0899) lines. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. Traders look for signals at rebounds and breakouts. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 15 pips. This will protect against possible losses if the signal turns out to be false.
No important reports or events lined up in the EU and the US. Most likely, we should brace ourselves for another low-volatility day, so there is no reason to expect significant price changes.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
