EUR/USD 1H
The euro/dollar pair turned around the critical Kijun-sen line on the hourly timeframe on July 16, performed an upward movement to the first resistance level of 1.1432, rebounded from it and returned to the Kijun-sen line, which, at the time of writing, it failed to overcome again. Thus, trading the pair was quite versatile the previous day. Neither the bulls nor the bears had an advantage on Thursday. As such, no buy signal was formed since there was no rebound from the Kijun-sen. But there was a signal to sell – a rebound from the level of 1.1432, but it was not obvious and absolutely counter-trend. Therefore, yesterday was extremely inconvenient for both buyers and sellers. However, the upward channel remains in force, so the trend for the pair remains upward. A rebound from the Kijun-sen line will be a signal to buy.
EUR/USD 15M
Both linear regression channels turned down on the 15-minute timeframe, which indicates the beginning of a downward movement. Meanwhile, the next trading week has come to an end and we need to assess the impact of the COT report on the pair's movement. The latest COT report from July 7 was rather uninformative. The most important category of large traders "Commercial", which represents professionals who trade on the forex 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 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. Thus, large traders continued to invest in the euro, which was fully confirmed this week, as the single currency continued to grow for most of it.
The fundamental background for the EUR/USD pair remained the same on Thursday, despite the very loud sign of the day. The summary of the results of the European Central Bank meeting was set on July 16, which is always interesting. However, the key rates remained unchanged, and the volume of the PEPP program remained at the same level, meaning that all the parameters of monetary policy did not change. Therefore, the reaction of market participants was more than restrained. To sum up, the euro rose by 50 points a few hours following the announcement of the results, without particularly changing the technical picture. And the same amount went down a few hours later. Traders only had hope for ECB President Christine Lagarde's speech. Lagarde said during a traditional press conference that the situation in the EU's economy has slightly improved, but the timing and scale of the recovery remain extremely uncertain. "The latest information indicates a resumption of economic activity in the euro area, but its level remains much lower than the values observed before the coronavirus epidemic," Lagarde said. In addition, Lagarde said she expected a greater recovery in economic activity in the third and fourth quarters, as more restrictions were lifted. The ECB chairman still believes that the eurozone needs stimulus measures for a faster and more complete economic recovery. Market participants are advised to closely monitor information coming from the EU summit on the last trading day of the week, if any. The outcome of the negotiations on the recovery fund (which Lagarde mentioned) determines the speed and scale of the EU's economic recovery.
Based on all of the above, we have two trading ideas for July 17:
1) Buyers continue to dominate the market, as quotes remain above the Kijun-sen line and inside the ascending channel. But at the same time, do not forget about the frequent pullbacks and corrections that are now inherent in the euro/dollar pair. Opening new long positions are advised with the target resistance level of 1.1432, if the quotes rebound from the Kijun-sen line (1.1371). The potential Take Profit in this case is about 55 points. The second target is the level of 1.1494.
2) Bears have not managed to cross the Senkou Span B line, the Kijun-sen line, or get out of the channel in the past few days. Sellers do not have enough power to form a new downward trend, and it is dangerous to work with corrections. Thus, we recommend selling the euro, but not before overcoming the Kijun-sen line, and ideally - after closing the price below the ascending channel, with the goals of the Senkou span B line (1.1278) and the support level of 1.1238. The potential Take Profit in this case is from 40 to 80 points.