Analysis of EUR/USD, 5-minute chart

Last Friday, the euro/dollar pair continued to grow non-stop and by the end of the day it was near the level of 1.0366. A week ago it was hard to imagine what could provoke such a sharp strengthening of the euro. As it turned out, one report on US inflation with a deviation of 0.5% from the previous value was enough. We have already said that from our point of view, such a movement does not correspond to the nature and strength of the single report that provoked this movement. But the market has its own opinion on this matter. The euro has certain grounds for growth, but at the same time, it still has quite a lot of grounds for falling. In any case, there is now an ascending trend line, which perfectly visualizes what is happening in the market. In addition, the price is confidently above the lines of the Ichimoku indicator, so most of the technical factors are now on the side of the pair's growth.

As for trading signals, the situation here is close to ideal. The first trading signal was formed immediately at the opening of the European trading session near the level of 1.0195. Afterwards, the price rose to the level of 1.0269, from which it initially bounced. At this moment, long positions should have been closed in profit of about 45 points. Shorts also had to be opened, and the pair, fortunately, managed to go down 15 points, so Stop Loss had to be set, at which the position was closed. Then a new buy signal was formed near 1.0269, but it was also closed by Stop Loss at breakeven. The last signal to buy near the same 1.0269 should no longer be worked out, because at that moment two false signals had already been formed near this level.

COT report

In 2022, the Commitment of Traders (COT) report for the euro is becoming more and more interesting. In the first part of the year, the reports were pointing to the bullish sentiment among professional traders. However, the euro was confidently losing value. Then, for several months, reports were reflecting bearish sentiment and the euro was also falling. Now, the net position of non-commercial traders is bullish again. The euro managed to rise above its 20-year low, adding 500 pips. This could be explained by the high demand for the US dollar amid the difficult geopolitical situation in the world. Even if demand for the euro is rising, high demand for the greenback prevents the euro from growing.

In the given period, the number of long positions initiated by non-commercial traders increased by 13,000, whereas the number of short orders declined by 17,000. As a result, the net position increased by 30,000 contracts. However, this could hardly affect the situation since the euro is still at the bottom. The second indicator in the chart above shows that the net position is now quite high, but a little higher there is a chart of the pair's movement itself and we can see that the euro again cannot benefit from this seemingly bullish factor. The number of longs exceeds the number of shorts by 106,000, but the euro is still trading low. Thus, the net position of non-commercial traders may go on rising without changing the market situation. If we look at the overall indicators of open longs and shorts across all categories of traders, then there are 23,000 more shorts (617,000 vs 594,000).

Analysis of EUR/USD, 1-hour chart

You can see that the pair continues to rise on the one-hour chart, has overcome the Ichimoku cloud on the 24-hour timeframe, as well as all the Ichimoku lines on the 4-hour timeframe. Last week, the reason for the growth was, of course, the US inflation report. If it didn't exist or if it turned out to be weak, then we could see a reverse movement. Now, until the moment when the pair settles below the trend line, we should expect the euro's growth.

On Monday, the pair may trade at the following levels: 1.0072, 1.0124, 1.0195, 1.0269, 1.0340-1.0366, 1.0485, 1.0579, 1.0637, as well as the Senkou Span B (0.9912) and Kijun-sen (1.0147). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal.

The European Union will publish a report on industrial production, meanwhile, there's nothing in the US. We believe the pair should start correcting today.

What we see on the trading charts:

Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.

The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.

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 reflects the net position size of each category of traders.

Indicator 2 on the COT charts reflects the net position size for the non-commercial group.