Analysis of EUR/USD 5M
EUR/USD showed a minor bearish correction on Thursday. It is quite challenging to call the movement we saw a correction; it's better to describe it as a "pullback." What is interesting is that there were two reports that could have influenced the pair's movement. For instance, on Monday and Tuesday, there were no significant events in either the U.S. or the EU, but the pair was confidently rising. Yesterday, the inflation report in Germany showed a more significant slowdown, while the U.S. GDP report indicated stronger growth. Since a decline in inflation is a bearish factor for the currency, both reports were on the dollar's side. However, the USD just rose by 30 pips. Thus, the conclusion is clear: no matter what news comes to the market, it refuses to buy the U.S. dollar.
It's a good thing that no trading signals were generated yesterday. The pair's movement left much to be desired. Constant pullbacks, low volatility, and the absence of a clearly defined trend. If the price came across at least one significant level, a bunch of false trading signals would have formed near it. The uptrend remains intact, and we still expect a significant decline in the euro. The current rise is considered illogical.
COT report:
The latest COT report is dated November 14. Over the past 12 months, the COT report data has been consistent with what's happening in the market. The net position of large traders (the second indicator) began to rise back in September 2022, roughly at the same time that the euro started to rise. In the first half of 2023, the net position hardly increased, but the euro remained relatively high during this period. Only in the last three months, we have seen a decline in the euro and a drop in the net position, as we anticipated. However, in the last few weeks, both the euro and the net position have been rising. Therefore, we can draw a clear conclusion: the pair is correcting higher, and the corrective phase has not yet ended.
We have previously noted that the red and green lines have moved significantly apart from each other, which often precedes the end of a trend. This configuration persisted for over half a year, but ultimately, the lines have started moving closer to each other. Therefore, we still stick to the scenario that the upward trend is over. During the last reporting week, the number of long positions for the "non-commercial" group increased by 8,700, while the number of short positions fell by 11,100. Consequently, the net position increased by 19,800. The number of BUY contracts is still higher than the number of SELL contracts among non-commercial traders by 109,000. In principle, it is now evident even without COT reports that the euro is set to extend its weakness. However, the corrective phase has not yet ended.
Analysis of EUR/USD 1H
On the 1-hour chart, the pair continues its upward movement, despite the absence of growth factors and even a macroeconomic or fundamental background. Since the price is firmly above the Ichimoku indicator lines, there is currently no reason to sell the pair. Nevertheless, we still believe that the euro's current growth is illogical and this should end with the pair starting a pronounced downward movement. Yesterday, the dollar had good reasons to rise, but we only saw a minor bearish pullback.
On November 30, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0806, 1.0889, 1.0935, 1.1043, 1.1092, 1.1137, as well as the Senkou Span B (1.0817) and Kijun-sen (1.0956) lines. The Ichimoku indicator lines can shift during the day, so this should be taken into account when identifying trading signals. There are also auxiliary support and resistance levels, but signals are not formed near them. Signals can be "bounces" and "breakouts" of extreme levels and lines. Don't forget to set a breakeven Stop Loss if the price has moved in the right direction by 15 pips. This will protect against potential losses if the signal turns out to be false.
On Thursday, traders can look to data on unemployment in Germany, eurozone inflation, and U.S. reports on personal income, expenditures, and unemployment claims. Naturally, among all these, the eurozone CPI report stands out. But even in the case of a new slowdown in CPI, we can't guarantee that the dollar will finally start an upward movement.
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.
