EUR/USD 1H
The euro/dollar pair continued its downward movement and finally broke the critical Kijun-sen line on the hourly timeframe of August 7. Thus, given the fact that the bulls have not managed to overcome the resistance area of 1.1884-1.1910, the sellers' positions are beginning to improve, but at the same time they are waiting for at least two significant resistance lines in the form of the Senkou Span B line and the support area of 1.1702-1.1727. If sellers manage to overcome these barriers, we can finally count on a new downward trend to form. Until then, the bulls can be active and enter the game at almost any moment. Given that the "four types of crises" continue to rage in America.
EUR/USD 15M
Both linear regression channels turned down on the 15-minute timeframe, which perfectly reflects what is happening on higher timeframes. The latest COT report, released on Friday, showed that the mood of professional traders did not change at all during the last reporting week (we remind you that the report is published with a three-day delay) on July 29-August 4. During this time period, the "non-commercial" category of traders re-opened a large number of Buy-contracts, namely 19,354. At the same time, non-commercial traders closed Sell-contracts, which were reduced by 3,561. Thus, the net position for the most important category of traders has grown by 23,000 at once, which is a very large and eloquent indication of the current mood of the major players. The most important thing is that the report data exactly matches what is happening in the foreign exchange market, since the euro as a whole continued to grow until August 4. In addition, the single currency managed without any losses in the next three trading days of the week. Therefore, so far, everything is going to the point that the next COT report will show that non-commercial traders are increasing purchases. However, we also suggest that you read the illustration below.
The lower indicator shows how the net positions of non-commercial traders are growing. The upper indicator shows the discrepancy between the net positions of non-commercial traders (green line) and commercial (red line) (the two main groups of major players). Such a strong divergence usually occurs before trend reversals. Therefore, we still believe that the trend could change to a long-term downward trend in the near future.
The fundamental background for the EUR/USD pair on Friday finally began to change in favor of the US dollar. In fact, the entire background was reduced to three macroeconomic reports, one of which was absolutely not important at this time. But the other two, the unemployment rate and Nonfarm Payrolls, can be said to have provided significant support to the dollar. First, this day's volatility was higher than usual. Secondly, the dollar has not often become more expensive in recent months. We can't say that both reports significantly exceeded their forecasts, but the figures were very optimistic for the currently troubled American economy. The main thing is that the labor market has started to recover, and unemployment has started to decline. Unfortunately, since all reports display data from a month ago, the following reports may be worse than the current ones, since the coronavirus has been openly raging in the United States in the past month, and although US authorities have not been able to introduce a new lockdown, the epidemic cannot but negatively affect the growth of macroeconomic indicators. We expect that the US economic recovery may slow down at the end of August. This may prevent the dollar from continuing to win back previously lost positions against the euro. There will be no significant publications in the EU and US on Monday. Thus, trading can be calm and without sudden movements.
Based on the above, we have two trading ideas for August 10:
1) Buyers did not overcome the resistance level of 1.1911. Therefore, they temporarily retreated from the market. Now, to make new purchases, you need to wait for the price consolidation above this level (or the resistance area of 1.1884-1.1910). Then we will recommend buying the pair with the target at the resistance level of 1.2043. In this case, the potential Take Profit is about 100 points.
2) Bears are still struggling to use their chances. The fact that they still managed to overcome the Kijun-sen line (1.1806) is good. However, for now they can only count on a downward movement to the Senkou Span B line (1.1724). Thus, we recommend considering new sales of the euro after overcoming the support area of 1.1702-1.1727 with targets at 1.1644 and 1.1509. Potential Take Profit in this case is from 40 to 160 points.