EUR/USD 1H
The EUR/USD pair began a long-awaited correction on the hourly timeframe on July 28. Unfortunately for the dollar, this correction may end as quickly as it started. At least at the time of this writing, the pair has corrected by only 60 points, which is minuscule in relation to the previous upward movement. Nevertheless, buyers loosened their grip, which allowed the quotes to go below the 1.1741 level and enables the pair to continue moving down to the critical Kijun-sen line. However, we should admit that the bears are still absent in the market, so it will be extremely difficult for the dollar to continue moving down anyway, and even more so to overcome the Kijun-sen line or the ascending channel.
EUR/USD 15M
The lower channel of linear regression turned down on the 15-minute timeframe, so we finally got the first signal of a possible trend change. The latest Commitments of Traders (COT) report showed major changes in favor of buyers. Professional traders (non-commercial category) opened 9,500 new Buy-contracts and closed 8,000 Sell-contracts during the reporting week (from July 15 to 21). The net position for this category, which is the most important, immediately increased by 17,500. In general, the European currency continued to rise in price after July 21 and does so to this day. Thus, non-commercial traders continue to increase purchases of euros. Therefore, the COT report does not give any reason to assume the end of the upward trend in the euro. Even the 36,000 Sell positions opened by the commercial category do not have much significance, since this is a group of hedgers and traders who usually open opposite categories of non-commercial positions. Simply put, professional traders set the tone.
The fundamental background for the EUR/USD pair did not change on Tuesday. In principle, there was no news at all from the European Union at the beginning of the new trading week. Thus, the European fundamental background has not changed completely. And nothing changed over the ocean, either. All the key themes remain the same. Market participants continue to closely monitor the scale of how the US deals with coronavirus, the clashes of protesters with US President Donald Trump's special forces in Portland and Seattle, the course of the election campaigns of Joe Biden and Trump, the intensity of relations between China and the United States, the stunning promises of the US president about the "golden life". Meanwhile, the US dollar continues to fall in price. In principle, the last nail in the dollar's coffin may fly this week. And this is not even the Federal Reserve meeting, at which traders are not expecting anything overly interesting. This is a report on GDP for the second quarter, according to which the most important indicator of the state of the economy will contract by 33-34%. This report will be released on Thursday and you are advised to not lose sight of it. Nothing interesting is expected from either the EU or the US until the evening. However, traders could become relatively active on the eve of the announcement of the results of the Fed meeting, and the US dollar may even continue to strengthen, since market participants do not expect anything pessimistic from the Fed.
Based on the above, we have two trading ideas for July 29:
1) Buyers continue to completely dominate the market, but have taken a break. Buy orders remain relevant with targets at the resistance levels of 1.1827 and 1.1996. Thus, now traders need to wait for the local correction to be completed, which may be signaled by a rebound from the Kijun-sen line or consolidation of quotes above the 1.1741 level. Potential Take Profit in this case is from 70 to 240 points.
2) On the other hand, bears continue to rest and wait for the bulls to give them at least a minimal chance to seize the initiative in the market. This requires at least price taking below the Kijun-sen line (1.1659). In this case, you are advised to sell the pair with the targets Senkou Span B line (1.1575) and the support level of 1.1486. You are advised to consider serious selling after the price consolidates below the rising channel. Potential Take Profit in this case is from 60 to 150 points.