Analysis of EUR/USD 5M
EUR/USD traded higher on Wednesday. This movement is entirely corrective. Yesterday's rebound from the critical line played no significant role, and the pair's volatility dropped to absolute lows again. After several weeks of relatively decent volatility, we must acknowledge the fact that the market has fallen asleep.
It is quite difficult to explain why the market is in such a sluggish state. There appears to be no shortage of fundamental or macroeconomic background at the moment. Nevertheless, trading intraday is practically pointless now. Therefore, we can only highlight long-term movements. For instance, a new wave of the bullish correction within the global downtrend is clearly forming now. As a result, we should expect it to end and consider short positions again. For the time being, the resistance level of 1.0757 seems significant, but we should understand that the corrective phase may last for another week or two. The pair is in no hurry to go anywhere.
Yesterday, there were no significant events or reports in the Eurozone or the US. The market had nothing to react to, and without news, it didn't want to trade. The situation with news and reports will not improve by the end of the week. Today, the Bank of England meeting will take place, but it has a rather indirect impact on the euro or the dollar.
Yesterday's highlight was the absence of trading signals. Throughout the day, the price barely approached the 1.0757 level and also failed to test it. Perhaps this is for the better, as it would be naive to expect any profit with such movements.
COT report:
The latest COT report is dated June 11. The net position of non-commercial traders has remained bullish for a long time, and we're still dealing with the same situation. The bears' attempt to gain dominance failed miserably. The net position of non-commercial traders (red line) has been declining in recent months, while that of commercial traders (blue line) has been growing. But now we're seeing the opposite once again. This shows that buyers, not sellers, are currently gaining momentum again. This might be temporary since the downward trend is still valid.
We don't see any fundamental factors that can support the euro's strength in the long term, while technical analysis also suggests a continuation of the downtrend. Three descending trend lines on the weekly chart suggests that there's a good chance of further decline.
The red and blue lines are currently moving away from each other again, which indicates a build-up in long positions on the euro. During the last reporting week, the number of long positions for the non-commercial group decreased by 1,200, while the number of short positions increased by 23,000. Accordingly, the net position decreased by 14,200. We may witness the start of increasing bearish pressure. According to the COT reports, the euro has a lot of potential to fall.
Analysis of EUR/USD 1H
On the 1-hour chart, EUR/USD has started to form a new downward trend, which is part of the global trend. As before, we expect the single currency to fall. At this time, the pair is going through a technical correction, and it may not be over yet. Volatility has once again dropped to absolute lows, making it quite difficult to conduct analysis and trading. The upward correction could continue for a considerable time. There are currently few sell signals.
On June 20, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0797, 1.0836, 1.0889, 1.0935, 1.1006, 1.1092, as well as the Senkou Span B (1.0818) and Kijun-sen (1.0741). The Ichimoku indicator lines can move during the day, so this should be taken into account when identifying trading signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 15 pips. This will protect you against potential losses if the signal turns out to be false.
On Thursday, no important events are scheduled in the Eurozone. The US docket features secondary reports on building permits and unemployment claims. These data may provoke only a local market reaction of 20-25 pips.
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;
