EUR/USD 1H
The euro/dollar pair reached the second resistance level of 1.1432 and rebounded from it on the hourly timeframe of July 15. We have already said that the pair is very often corrected within the current movement, so it is not surprising that a new round of corrective movement has begun. Buyers have significantly improved their positions over the past few days and are now trading near the upper line of the ascending channel. Overcoming the level of 1.1432 will most likely lead to continuing the upward movement. Sellers have nothing to oppose now. They are waiting for the bulls to retreat and the pair to consolidate below the ascending channel and the Kijun-sen line.
EUR/USD 15M
Both linear regression channels are still pointing up on the 15-minute timeframe, signaling an upward trend in the most short-term. There are no signs of the beginning of a new corrective movement at the moment. The latest COT report from July 7 was not informative, however, it provided answers to our questions. The most important category of large traders, commercial, which represents professionals who trade on the currency market for the purpose of commercial profit, opened almost 6,000 Buy-contracts and only 1,700 Sell-contracts. Thus, the net position in this category has increased by almost 4,000, which, simply put, means that the bullish mood of major players has increased. At the same time, the total number of Buy-contracts for professional traders is also much higher than the number of Sell-contracts – 186,000 against 80,000. The general conclusion is simple: professional traders are still focused on buying the European currency. This hypothesis is still fully confirmed in technical terms.
The fundamental background for the EUR/USD pair remained unchanged on Wednesday. The only macroeconomic report on industrial production in the US caused the dollar to slightly strengthen, although, given the nature of the euro/dollar pair's movement in recent weeks, there is great doubt that the quotes fell because of this report. Traders still attach more importance to the overall fundamental background, which is still not in favor of the US dollar. One of the most important topics for the greenback was developed yesterday. US President Donald Trump signed two decrees at once, united in one law "on the autonomy of Hong Kong". The first decree concerned the removal of all trade preferences in Hong Kong, which now makes this district, in fact, just part of China, against which the general US sanctions and duty policy will apply. The second decree provides for the imposition of sanctions against officials and legal entities who are responsible for the loss of Hong Kong's autonomy status. Trump himself said: "Hong Kong, in my opinion, will no longer be able to compete with free markets. I suspect many people will leave the city." Beijing, of course, will not sit idly by and is already preparing retaliatory sanctions against Washington. "Hong Kong's affairs are exclusively China's internal affairs, and no foreign state has the right to interfere. Washington's plan to prevent the implementation of the national security law in Hong Kong will never be successful. To protect its legitimate interests, China will give the necessary response and impose sanctions on relevant individuals and organizations in the United States," the Chinese foreign ministry said in an official statement.
Based on the foregoing, we have two trading ideas for July 16:
1) Buyers continue to dominate the market, so we just need to wait for a new buy signal. The trend remains unambiguously upward, but still do not forget about the frequent pullbacks and corrections, which are now inherent in the euro/dollar pair. You are advised to open new long positions with the target at the resistance level of 1.1494, if traders re-consolidate the pair above the level of 1.1432. Potential Take Profit in this case is about 55 points.
2) The bears have not been able to cross the Senkou Span B line, the Kijun-sen line, or leave the channel over the past few days. Sellers do not have enough power to form a new downward trend at this time, and reaching corrections is an unrewarded task. Thus, we recommend selling the euro, but not before overcoming the Kijun-sen line, and ideally after closing below the ascending channel, with the goal of Senkou Span B line (1.1278) and the support level of 1.1238. Potential Take Profit in this case is from 40 to 80 points.